The IRS wants you to pay taxes on the depreciation you previously claimed as deductions since it reduced your taxable income.

The first floor is rented out to a seasonal business, they pay year round, $1000 a month.

The listing shows that it has the potential to cash flow around 5K per month after paying for the loan.

Our idea is to continue living in our unit and have our next-door neighbor (attached unit) pay us rent, which would help cover our new mortgage.

I would expect to pay under $20,000 for a three-unit property.

Do you pay them? 

One of my properties cost me a little more, but the other two were less than what I was paying with foremost insurance.

I have about $15k I have to pay back for school.

In Worcester, I think your numbers are pretty close, but there are also a lot of Programs between Mass Save, and the City of Worcester that will pay for many of these things if you agree to an income restriction, or sell income restricted. 

You're just using new debt to pay off old debt (which is the same concept as your alternative: refinancing your primary to pay off the HELOC).