Back to finance question, would it be a better decision to take the funds from the sale of the 2 acre lot and pay off the current mortgage (~$150k) and live in the current home for a year or so (in hopes that interest rates will go down) then refinance that take out $400k from equity (~$750k) to build new house? 

She does not have money for her expenses and is borrowing at a high rate of interest which is becoming impossible the idea is to sell my cousins rental property take a boot to cover her expenses and the rest ($750,000) do a 1031x.  

Unless you come across an opportunity that has much better cashflow, I don't see a reason to get rid of a property that has decent cashflow with a low interest rate in the current environment.

Builders are buying down the interest rates to 5% making payments work for cash flow.

Higher interest rates continue to make it more difficult, especially for an investor that is looking to house hack, cash flow, or DSCR loans on the commercial side are a nightmare. 

However, if we went that route, we’d be giving up the 2.5% rate on the home as it is.

Would it be better to do a sub-to and take over their existing mortgage and rate OR get a PML?

As the property spends more time on the market, the return on investment will decrease.

Sometimes in states like OH or PA, a lender might require you to buy it out, which increases your rate. 

You may find one out performs the other by a lot especially with interest rates (and HML rates can kill what might look like a good deal otherwise).I would be happy to take a look at the specific property you are interested in . . . send me a message with the address rather than posting it here.