Its much less "passive" than a typical rental, but the pros FAR outweigh the cons IMHO - especially if the unit isn't too far from your primary residence. 

The benefits I see are outweighed by the potential downsides and extra admin overhead.

Know that the interest rate matters less than you think because the other uses of the cash should outweigh it.Hope that helpsStephanie

I chose to obtain my license because the pros outweighed the cons associated with that, and also it fits in nicely for what my family is trying to accomplish in the Real Estate Investment Game and life itself.  

That would be the fact that demand far out weighs supply.

Is there a potential opportunity here or would the upfront costs to acquire and complete the project out weigh the end profits ? 

There is something appealing about having re-occuring access to those funds with a HELOC, but IMO, the cons outweigh the pros on a HELOC. 

In the late 2000s crash we were building more homes than we had buyers for, creating a situation where the supply far outweighed the demand, but for that "slack" period people were still buying houses at their previous values, even though the market didn't justify that price.

If the cash flow substantially outweighs the extra interest you are paying it might be worth it.

Variable rates are concerning to me currently, but the cash wisely invested could certainly outweigh, particularly if you have a project that gives you a return within 12-24 months to pay down the HELOC.