I have personally done this over and over again and every time I have been able to refinance all of my money (down payment and renovation costs) out of the deal while maintaining true positive cash flow.

But, if he has equity in the property , I would sell and get the $250k tax free gain.

Assuming you did not invest originally.To clarify, I am coming across some opportunities where a sponsor is in the middle of the biz plan, their loan is reaching maturity, they need extra capital, and they are attempting to raise the extra capital from other LPs rather than or in addition to a capital call.They are offering "rescue capital" investors pref equity that is ahead of original common equity investors.

Without knowing much about your goals my general advice would be to tap the equity and use that equity to purchase more real estate.

Creating $1,200 of total cash flow and nearly $150,000 of equity.

Biggest take away is finding a location or a property that you can run the numbers on any renovation or market to check future ARV/equity.You want to have equity built up in the shortest amount of time to try and refinance to take cash out or take out a Heloc. 

Also consider equity trapped in your house is dead equity. 

Most people cash out on their equity and buy in cash overseas. 

Buy and hold - utilize sweat equity tobuild a primary residence for my wife and I and build an ADU to offset the cost of ownership.  

You could have something make more money in a 3 year horizon but you need your return in 6 or 12 months etc.Do you have an address of the property for a Google street view to see how it is positioned on the road and in the market?