Although it's more difficult, HELOC's can be obtained on an investment property.

As far as using them repeatedly you'll find it's either too difficult or the numbers are less than desirable.

Depends on budget and your threshold for the balance of cashflow VS appreciation. 

Get your personal finances organized into a folder with your tax return and a personal income statement and balance sheet.

As an investor, it's often difficult to qualify for traditional mortgages -- for this exact reason.

Most banks get a Brokerage Price Opinion for what the property is worth and you have to show the hidden flaws in the arguement, hidden repairs, and dangers of the house and how difficult it will be to sell it.In all honesty this conversation can take a long time I had some training on it that was 10 hours long. 

If they do exercise their option, the lease contract is terminated and a new owner finance contract begins with monthly payments of $1K/month (same as lease agreement) and a balloon payment for the balance is due on the 24th month. 

There's not enough negotiation going on because the balance is tilted towards the seller. 

I am looking for some advice on how to handle a difficult situation with a contractor.

I have been told that this can very difficult and costly to do due to opening walls/ceilings.(2) Install a mini split system (outside condenser and wall units) for the second and third floor.