I own two houses that my grandmother gave me. They are both very old 1960's, and need a lot of work. I was thinking of taking a loan out on the equity of one house to fund a tear down of the old house and possibly putting a new manufactured home on the property. Here's where I get stuck, do I just rent that out after I try to refinance the loan or should I sell outright? How do I pay back the loan of repairs if I don't sell outright?

All depends on the numbers, @John Brooks . If you share your numbers we can help a bit more.

Talk to an experienced real estate agent in that area to See what your best options are. You need to know exact numbers to determine if that is worth it.