Most often it's in free & clear properties but, in a high enough desire area like these, and with low enough mortgage balance, yup, some can 100% get enough on the sale to have it all make sense because as @Jay Hinrichs has pointed out that in these areas the majority value is in the land not the structures on the land. 

Do not forget to prepare the balance sheet, track distributions etc.

We will pay off a few more loans with smaller balances, even though they are lower interest than what we are getting on new acquisitions.

Cash flow, equity growth, or a balance of both?

You then draw your HELOC balance as the down payment for the flip.  

Cash flow is important of course, but so is appreciation, so I want to ensure I have a balance of both.

This is the point that in my mind the house has reached a balance point and is stable.

What you could doIs continue to pay that loan and have the owner also select finance you the balance.

Balance debt and cash to preserve flexibility and scale efficiently.This post does not create a CPA-Client relationship.

It's a balance of cashflow and wealth accumulation.One of the goals is to have tenants pay as much of your cost-of-ownership as possible (loans, taxes, insurance, etc.)In high-cost areas, any Class A or B property you buy will usually negative cashflow for the first 3-5 years, until rents rise enough to cover the negative cashflow + rising taxes & insurance.Investing OOS increases your risks because you may not know the market and you can't check on everything/everyone all the time.If you move forward with your buddies, HIGHLY recommend creating a solid Partnership Agreement!