I've sold quite a few rentals by owner, but on principal, not to save commissions.I would recommend having your lead paint (if pre 1978) and condition disclosures filled out and at the ready.

I certainly did not, and neither did the mortgage lender who  pre-qualified me.After closing on the HELOC  this week, I was reading through the docs last night and stumbled upon the Occupancy clause :"Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control"So I'm not sure what to do.  

Then later you will be putting in quite a bit of cash if it needs all the things you say.The only benefit to holding would be the monthly equity buildup thru principal reduction on your mortgage, which is a slow, (and some depreciation) but fairly sure way to amass equity,  a free house in 15 to 30 years is a great thing., but 30 years is a long time...however you have to be prepared for the possibility that the rents could go down and not cover the mortgage (not too likely in my opinion) or the vacancy factor could go up and you again may not be able to cover the mortgage.Lastly if we have another crash in values and it goes down under what you owe then your $35k equity could disappear.These scenarios could cause you to  end up giving it back to the bank and ruin you credit thru no fault of your own.

Question is this:Lets say that a homeowner bought his house in 1990 for $200,000 and he kept paying on it until his principal was cut in half, right at $100,000 by January 2015.

That left $75k to put into another deal.There’s something else you need to consider when looking for an FHA owner-occupied triplex or fourplex, which is that 85% of the market rents on all four units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance).  

Buying at the top you only typically get principal pay down and some tax write offs.

I repaired literally everything in the house when I owned it, so maintenance has been minimal recently.However the house is in a good area with potential for appreciation and I'm 10 years into the mortgage now, so I'm paying down about $350 a month in principal.

Then I'll decide what minimum principal and minimum points will make the effort worthwhile.

Starting out here, Does PITI stand for Principal, Interest, Taxes, & Insurance?

If I were you, I'd ask one of your family members to be a key principal to sign on the refi.