I used a LOC to build a 12 site RV park in a small town, opened it up and 1.5 mnths later, I'm full occupancy and servicing the debt (some of it at 8.75%) & cash flowing.

The didn't live within their means, accrued a lot of debt, and it eventually resulted in them not paying rent and being evicted.Consolidating debt reduces their payments so they have more money available, but it doesn't automatically teach them to live within their means.

If you find some good deals you could use debt to acquire more doors to get you to your cash flow number faster (your option 2).

Since I’ve been syndicating real estate debt and a few equity deals for 25 years, I’ve made it my business to maintain a constant “overview” of the “product” being offered.  

You can refinance it into a conventional loan and that helps avoid the higher down payment.FHA also offers more wiggle room when it comes to DTI debt to income ratios and reserves requirements. 

If you do you may run the risk of piercing the corporate veil of your LLCs making you personally liable for business debts. 

For me I have 3 main goals I am shooting for:1) Pay back the debt I acquired purchasing rentals this year. 

Bob arranges the money for Joe, so the bank is short again even though Bob could have paid more on the debt.

You are required to disclose that debt, and it will be a fairly easy catch for an underwriter, even if it's not on your credit report. 

More importantly, get the high interest rate debt paid off first.