Hope you don't put down large earnest money deposits... these guys will make sure you lose them! 

I'm looking to invest between $50k and $75k as the down payment. 

This guide will break down the key reasons to explore this market and how you can navigate it effectively.What Are Distressed Properties?

They'd be much better off being a Hard Money Lender and make 5 times that (and every repair to their "investment house" is paid by them...So, if you put $10k down on a property and make $150/month net cash flow your Coc Return (annualized) is 18% which is Very Good.If you followed that and understand it then keep looking for a deal.

I've seen too much economic development & new construction down this corridor in the last 12 months. 

As you suggest lowering down payment to buy more properties is one way, although the downside is greater risk in event of down cycle and more time to manage required.  

At $1M let's say you can do zero down to 20% or more down. 

Is it foolish to consider using the HELOC for the down payment?

Even with all that it could burn down. 

You should sit down with the tenant and talk this out, EYE BALL TO EYE BALL.