I am considering buying the property in cash then hiring Servpro to fix the cigarette damage.

The biggest hurdle you'll have to overcome is accepting breakeven or negative cash flow at the start. 

Using simple numbers, assume I want to purchase a $100,000 property using crypto as collateral:- I pay the closing costs with cash- I put down 10% down payment with cash ($10,000) - I utilize a crypto mortgage for the remaining 90% ($90,000) This way, I still keep my crypto and I have a property, both of which may accrue in value over the long-term.

However, if you plan on living in your existing house and when you convert the basement you can rent out for an additional $1,500 then your cash on cash return of your $50,0000 would be 36% (18,000/50,000), which is a great ROI.

Are you cash flowing the property?

You're cash-flowning a little. 

Leveraging your equity through a HELOC or cash-out refinance can be a smart move, but it depends on your risk tolerance and goals.

as mentioned the most common way is you do a cash out refinance to buy an ex out of a property.

The idea is to expect a negative cash flow, however bank on the growth to achieve a good return.

You only take what you need when you need it.Heloan usually means 2nd place like a cash out refinance but they do not pay off the first mortgage they give you an amount in cash like the $10K above.