Right now, you have a property with a great equity position, solid cash flow, and cheap debt (interest rate is low). 

If you wanted to earn $200k to live on at a W2 job....you'd need to earn significantly more because you'd have to pay income taxes, and payroll taxes on the income; where as taking on debt isn't taxable at all. 

While I do maintain a relatively modest percentage of my assets in money market instruments, corporate debt funds, and high dividend stocks, I remain most comfortable with the investments I specialize in and know best.  

However, you can get loans that are based on the performance of the rental and not your personal income and debt.

If you take out debt to acquire, you will be negatively leveraged.  

Trying to decide if we should use a home equity loan for the remodel, do we need to put current home under LLC to help with debt to income ratio & would that affect getting the home equity loan?

., adding rooms, bathrooms)-Cosmetic Enhancements-Eliminate Health and Safety Hazards-Energy Efficiency Improvements-Major Landscaping (e.g., grading, tree removal, adding walkways)Non-Acceptable Renovations:-Luxury Items-Commercial Use-Temporary Structures-Non-Residential BuildingsBoth of these renovation loans are similar in many ways, but the key differences are:1.

@Shayan Sameer If you can service all debt and property expenses and have money left over then I'd say it's worth it.

Any repair issues the new acquisition has you will feel to much greater magnitude due to the property carrying a lot of debt.

I would suggest taking the route of option 2 or 3, so not only are you saving over 10k in rent per year but the residents help in paying down the debt.