Assuming you are both working and the rentals are long-term, rental losses up to $25,000 can offset W-2 income if your MAGI is under $150,000, with excess losses carried forward.This post does not create a CPA-Client relationship.

Reason is a Heloc generally carries a higher rate on a shorter term and "Can Never" be used as an "Asset, or for PITI reserves" which are both required when you buy an investment property. 

Auto limits of 250/500/250 and Homeowners liability of 500K should be the minimum you carry.

I know there are a lot of options, especially since they are family and willing to carry the loan. 

And you can't legally dictate how much they carry for personal belongings. 

Its great that the seller is will to carry a note in a seller 2nd as well, that will help reduce your require monthly payment with the right lenders.

The current way the studs are built is not up to code, so they have to rebuild the entire structure of the kitchen wall This is not uncommon especially when renovating an older home and when budgeting you should also carry a very heavy contingency for unknowns. 

Make sure you ask them good questions, make sure they carry insurance and that they are available year round. 

This setup alone feels like a solid foundation for financial freedom.Here’s my dilemma:While I understand that my mortgage interest rate is very low (2.8%) and there are tax benefits to carrying the debt, I’m wondering if it might make more sense to aggressively pay off the loan.

Extra 4 months of carrying costs are up most of the margin.