Also, there are more things to consider than max ROI.Most people start by picking a particular type/style of property that they like for some reason (usually a gut decision).

In retrospect I would have spelled out the construction process more clearly in writing ahead of time.In your case the existing tenant is getting no new value so there is nothing for them to gain with this project.

So make sure your uses of the refinance money conform to business  purposew if you want to write off the interest.This method is commonly used in a 1031 consolidation exchange. 

Understand renovation and how to write a scope of work4.

However, if you can flip it and make a solid profit higher than what you would get out of a cash out refi and/or rents won't cash flow, then flipping makes good sense (unless you need a tax write off but since this is your first investment, that probably isn't the case).  

He jumped on the short-term rental bandwagon, hired a property management company to handle the day-to-day, and hoped to write off a hefty sum against his W2 income.However, his journey took a turn for the worse when he got audited by the IRS.

The heavy cleaning and repair costs after longer stays are definitely pain points but I've seen my clients make it work by screening the tenants more carefully for MTRs, doing bi-monthly checks to catch issues early, and writing clear lease terms about maintaining the property.

In many cases the mortgage company writes off the loss or goes after borrower depending on if they have other assets - if they do then they are gonna be coming after the owner

It heavily effected his under writing results.  

Not every lender can write mortgages in a way that support our transactions.