Troy,
I am assuming you are taking out the HELOC to get money for a downpayment for the new STR #2. If that is the case, have you considered if the seller, or bank would allow you to pledge or cross collateralize your "equity-rich" STR #1 in lieu of a typical cash downpayment. This may be possible if the Lender for the new property and the property you already have the 3% loan on are the same lending company. In theory, that lender that has the 3% loan with you now on STR #1 would know the current value of your home and your payment history and would know how much equity you have. They may allow you to pledge that asset's equity instead of a cash downpayment and pick up a new loan on STR #2 at the prevailing interest rate. The only caution I would have is that you need to make sure the combined net cashflow from both properties covers each note. Because terms of the loan will most likely contain a cross default clause. Which will allow the bank to foreclose on both properties if you default on one of them. I would also see what your sensitivity to vacancy is. You cannot afford any major long term vacancy. You should also make sure that your jurisdiction has no plans to change rules on STR rules especially during the early years of your acquisition.
