2 houses paid for, one being rented. Not sure what to do next

[Paul Byrd]

I have two homes that are paid for.  They are both on basically the same street.

Both homes have a detached garage that could be converted to liveable spaces and rented out.

Home #1 is currently rented with a great tenant, basically month to month, $850 per month.

Home #2, I live in, and its almost fixed up enough to rent out. When its rent ready, I can charge $1,250 per month.

I've never bought a home.

Both homes were gifted to me. 

Both homes are luckily in an area that the home prices are really starting to rise pretty fast. (East side of Atlanta, just outside 285).

So I've never gone through a loan process, or the finance side of a home purchase.

That side scares me because of the "unknowns".

I have been looking at two options...

1. A work buddy has a house next door to him that is for sale for $180,000 (Norcross). My buddys house just appraised for $230,000. Was thinking about taking out a HELOC, and using it to buy the house.

2. Finish off the two 500sqft detached garages, and rent them out along with the two main homes. Then look for another house.

Thanks!