These are typically interest only and require a payment of 1-4 points up front depending on your area and the PML.

The allocation was non pro-rata.   

Does anyone have any recommendations of first time home buyer grants or down payment assistance programs for New York State?

Just make sure to run the numbers with the HELOC payment and the rent, so that you are not underwater every month.

Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes.

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

My question is, since we may not need to borrow anything to finance this, will the mortgage payment be affected? 

if the note is currently in default and we can buy at at least a small discount, we may be able to restructure the note with no monthly payments - we would get paid all interest at closing when the property sells.  

Wondering if I should just wait until rates drop and refinance into the LLC or do the quit claim deed (and no HELOC) and just save up for my down payment for the next property.

With down payments, improvements, commissions, title work, holding costs etc....