@Sarah Santa CruzIf you have funds and are liquid to cover repairs etc then I would pay it down as it gives you flexibility and exit strategiesI would not pay down the 3-4% loans as you can invest it and do better but at 7.375% investing to get that return (net) would be historical average so I would say pay it down

@Dan Guenther to add to your deal, there are loan that lend specifically on STR income that this property location can qualify for.

All-in costs, including design, survey, permitting, construction loan interest, land, construction will be $360,000.

People still want to live in these areas but it may not be easy for them to qualify for a mortgage or the banks may not want the particular property on their books because of peeling paint, loan amount, etc.

Note this is my first time dealing with this loan broker and lender. 

I used a VA loan and put 0% down.

And somehow the loan went into foreclosure..

Open to loans but only if we net 10k a month after mortgage payments

The new mortgage on the new $340k duplex home which is an FHA loan is going to be a monthly payment of $2800 and we will refi ASAP (the current rate is 6.7%) when rates go down.We have done some nice improvements on the SFR and will be refinishing the wood floors before a renter moves in (July 1) so feeling like it's a great opportunity for the right long term renter and we plan to screen prospective tenants well.We are taking a $20k HELOC on the SFR for the downpayment and plan to pay that off within 12-18 months.

Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.