(For example, IF I was able to purchase the first home (multi-family) outright, paid-in-full, then use a HELOC to pay for the down payment and closing costs for the second home, would that be a smarter approach?)

I am currently working on phase 2; building 2 ADUs.The permits are already in the works but the biggest question is what is the best approach when funding these 2 ADUs BEFORE I have the equity from my home?

Securing financing is often one of the biggest challenges new real estate investors face.

If you can rehab and refinance (BRRRR) to extract all investment and achieve neutral cash flow you would have infinite return (most of my RE investments have achieved infinite return but the cash neutral has in particular gotten a lot more challenging when the rates rose starting Q2 of 2022).Any money extracted via a refinance is tax deferred. 

It's always a little more challenging investing in out of state (I invested out of state for 15+ years) but you can still be successful doing it. 

Challenges?

Two things not covered so far:1) If a buyer challenges a seller-financed transaction, the Dodd-Frank penalty is that the lender must make the buyer whole.

Challenges?

I would think you should approach some local banks and see how they will handle your situation.

Challenges?