Using leverage is fine... its the level of risk, and each investor has a different plumbline by which they measure how much risk is comfortable.I keep my properties in separate bank accounts. 

If it is the actual foreclosure auction, not a REO auction, the bank can only collect up the final judgment amount.  

@John MoonGiven the information above, I believe you have two good options: 1) Finance all three separately on conventional, FHA financing (under 4 units)2) Approach a local bank on the deal.

That's a bank requirement.

The new property, SFH2, is worth $115K after the rehab.John now owns SFH1 which is worth $125K, SFH2 which is worth $115K, and has $10K in the bank. 

I even tried withdrawing some credit from the Bank of Mom, but alas, the bank was tapped out and the best I could muster was about $2,000.

https://www.businessinsider.com/housing-market-bubble-risk-ubs-2018-9

I own 3 properties two are in contract I am the bank the third one is going into contract soon. 

The tenant doesn't own anything until the option is exercised and they actually buy the property.Owner financing is the owner acting as the bank with a promissory note with the terms of payment (principal amount, interest rate, number of months).

Don't forget these because some banks won't refi until you have a proper seasoning period.