Funding that 2nd deal - Help me choose my next adventure

[Nick Smith]

We bought our first rental at the start of the year. It's nothing to brag about except... it was my first deal. I did something! 

It's a SFH 2bd-1ba worth $57k and owe $41k at %5.625 (rents at $700/mth)

I'm working on the second deal: a duplex (3bd-1ba for $800/mth and 2bd-1ba for $600/mth). This currently includes utilities (1 furnace). The owner wants $75k (worth $78k), but I think I could get the duplex between $65k-$70k. There's some work that could be done (outside paint and possible reshingle in the first year). I'd plan to update floors and paint inside if/when tenants switch.

For number's sake we also own a SFH worth $158k and owe $63k.

I'm open to options for funding and anyone's opinion on my thoughts below:

1) Use a HELOC on our existing personal residence. I could borrow up to $63k on a variable rate line of credit with a floor rate of 5% and ceiling of 12% for up to 10 years. It brings me close to a no money down deal. This gives me some time to think about a refinance later and keep the HELOC for future deals. There's also the option of adding a 3rd unit in the tall basement (would need $$ for adding egress windows, kitchenette, bathroom, etc..) The variable rate is a little scary. 12% is pretty high (although one bank quoted a ceiling of 18%!), but I'll double-check the numbers to see if it still cash flows at this rate. **It does**

2) Get a normal mortgage. I've called three banks so far and the lowest deal I found was 20% down at 4.7% with $1500 in points at closing. There's a 15% down option with similar rate and $2100 in points at closing. It sounds like because it's not a primary residence, a rental, a duplex, etc... it's a higher rate (albeit lower than 10 months ago). I don't particularly want to have $15k+ to bring to closing.

3) I hadn't thought of this, but a bank manager friend brought it up. Since my first rental is at a higher rate, it may be worth packaging the first rental and the new duplex into one commercial loan at a possibly lower rate altogether. If the loan value was less than 80% of the net worth of the houses, then I wouldn't have to bring a down payment to the deal. 80% of $134k (net value) is $107.2k. If I got the duplex for $65k and owed $41 on the previous rental, that's $106k owed. Just under.

What am I missing? What might you do? New thoughts? Combinations of the above ideas?

Missing from the above could be goals. I want doors that cash flow, but mine is more of the long term pay down - buy and hold approach. Thanks everybody!