Purchased with a 25% down payment.

If you start just using $100,000 of your HELOC for a down payment you can then use the rest of it to scale up into a bigger property once you have a little experience.

As a result, I'll be selling my house and using the gains to put a down payment on a secondary house next to my current rental property.

Lender tells me I could easily get preapproved for more but capital is the issue as I need 25 percent down.

Hit the nail on the head I am in total agreement.

We're definitely headed in the right direction.  

I primarily operate in Pinellas County, FL and Pinellas Realtors has a site with every localities rules and contacts.I am not sure if you are looking statewide or nationwide but there are likely sites that can zero in on an area and help break it down and then you can call and independently verify.I also recommend Municode.Good luck!

Also, even an old beat up floor looks decent and bedrooms usually have a lot of furniture so you can only see a small part of the floor anyways and tenants may even put down a throw rug.

Is there anything else we should possibly do to avoid any problems down the road?  

I have a nice down payment as was gonna offer a potential subject to if i paid their profits/ closing costs...but can you subject to a loan not in bad standing/ FHA?