Hi Tom,I love crunching numbers and thinking about returns. 

So I offered to pay for the flight, if they returned a clean and empty house.

Quote from @Conte Cuttino: Makes sense @Andrew Freed so say if we I can make it additional legal space, do you think the 107K left in the property for the return is worth it or should I sale and move on? 

“ cash flow returns” almost always compare horribly to a simple bank CD after you deduct for insurance, prop taxes< vacancy, capex, prop management (or your personal time.) etc etc etc. 

Another note on construction cost, going vertical is very expensive now and would require have a great connect with a developer and a builder in the area.See what rents are in the area and run the numbers to ensure the rents will cover your costs and give you a solid return—using the 1% rule can help.

Is your highest priority immediate cash flow or would you rather have an investment that may give you a greater return but it may take a couple of years?

Multi-family properties many times provide a better return per square foot than single family, which would be to your advantage as well.As long as you're mindful of the reinvestment requirements and purchase at least as much as you sold and use all of the proceeds, you shouldn't have any issues with this strategy.

As I invested a few years back, my returns have been pretty good with cashflow and appreciation. 

You can have multiple conventional mortgages and have a great credit score as long as you don't pay late or get too close to the maximum debt to income ratio.

And assuming a 0% return on the $200k you could have in the bank earning $10k/year if you sold.