Yes you can finance rehab into a 203K, but only if the home will be your principal residence.

Even then you run the risk of the appearance of a conflict, and the resulting potential lawsuit.The conflict arises because of the different legal roles of an agent and a principal.  

I love @Aaron Mazzrillo and he is a true transaction engineer in the Republic of California.California for terms deals such as lease options and installment sales purchases requires strong knowledge of agency law.The California BRE, bureau of real estate, requires a license to talk to sellers and buyers about buying and selling and leasing residential real estate, unless you are a principal buyer or seller and not assigning.I advise most California investors to do Delayed Sales and Purchase agreements w rights to occupy, losing their earnest money if financing is not successful.

Any cash flow would honestly go toward the HELOC principal right now.You can see the monthly cash flow as it calculates below. 

You find a distressed homeowner who is 6 months behind in his mortgage, and owes $100k in principal and another $10k in interest and late fees - so the payoff on the note is $110k.

Free cash of $1,300/month (the $1,150 you are currently paying in mortgage and utilities plus $150 cash) could then be used to pay towards principal on SL and car not, accelerating debt pay down.78% RR on 20k minus 5% avg SL and Car interest and 4% mortgage interest = IRR of 69%I think (assuming I'm looking at this the right way), using your 20K in cash soldiers to generate additional income is more advantageous than using it to pay down debt.

The principal reasons are:Sourcing off market properties is more work.  

After refi, principal paydown is our friend and helps mitigate any potential future decrease in value.  

I'm basically a 'principal' in the deal, meaning our relationship is adversarial and I am negotiating on behalf of my own interests, so just because I have a real estate license nothing like fiduciary responsibility applies. 

"One- to four-unit principal residences, one-unit second homes, or one-unit investor properties including units in condos, co-ops, and PUDs.