HELOC and Refi to increase liquidity in Case of Downturn?

[Tobey Grey]

Newish to Real Estate, purchased my first property about 1.5 years ago and have been rehabbing slowly. I was hoping to leverage it in the next few years. My small business has taken a hit in the pandemic and I am now considering prioritizing rental income to create more security. I am in the Bay Area and I don't anticipate struggling to find renters. I have a 3 bdrm SFH fixer and a studio apartment I'm finishing in the back. I have the 40k needed to finish both in which case I could move into the studio for now and would profit about $400 a month on renting the house. This feels more secure long term in cutting down monthly mortgage costs, but risky in that I'd be using the majority of my cash reserves. Possibly I could refi or HELOC to create a reserve and give me an option for another property if the prices soften? Or is this naive thinking/I'm missing something?