It would be a good idea to assess your tolerance to risk and then plan something like that, but using a heloc is going to be around 9-11% in this market so to pay something off with lower interest rate to borrow more might not make much sense.

I make around $110k+ per year, live off around $75K, have a mortgage ($1900/mo for rent, escrow, tax), around $40K in equity, and no other debt. 

You may be far better off structuring it as him being your lender (as opposed to a partner) or, alternatively and likely less attractive, you being his contractor.Part 2.

I know they would be worse off refinancing at today’s rates even if they could find an alternative lender able to lend on older mobile homes.

@Joshua MartinSince you might sell next year, a HELOC is probably the better short-term option—lower upfront costs and flexibility to pay it off when you sell.

You’re not going to find a safe way to do what you want unless you or the “buyer” has enough cash to pay off the note. 

Borrowing against your paid off house without an income puts way too much pressure on the success of whatever deal/project you decide to pursue. 

Personally, If I could pull out a HELOC, I would use it to fix and flip which will typically make sense as you shouldnt be keeping the money out for that long and you can recycle it or pay it back and build off the capital that you got from. the flip.

I personally would not invest in detroit as historically its not a appreciating market and for cash flow and I invest primarily for appreciation - I go off the location location location mantra. 

Plus the mortgage company probably calls the loan, and if you can't pay it off then you can lose the property.