If it was me, I would and DO use the HELOC, because it offers the most flexibility for deals now and (if it is a revolving line), eliminates the need in applying for future funding down the line (some people will say that the adjustable rates can get you.

(also what would your friend think about the revolving door of strangers in the house with her?)  

Also, you need to assess your habits and relationship with revolving types of debt.

If it is more mom and pop tenants anything as a big expense onto CAM you generally will have to spread over many years to recover as too high a CAM on top of base rent will shock their business model.

How far back is it reasonable to allow the owner to seek stale CAM charges?   

I'm a 30 year Aircraft Design Engineer with ALOT of CAD/CAM experience so I think we are going to offer a Design service along with our construction company.

The other issue revolves gearing or debt on the deal.

With the type of profit I figured (about 20k annually) I just don't see the downfall other than the 'headache' that goes along with it.Thanks Jennifer,Thanks for your reply and question.Although I don't know the area you mentioned I have had experience with hundreds of deals in lower class areas (mostly SFH).It was difficult enough managing and collecting rents in these SFH and I couldn't even imagine what it would be like managing a multifamily in such an area.I have personally never owned such a property so I can't speak with full confidence but I can say that I have witnessed many similar complexes become revolving doors over and over again.Investors get attracted to the cashflow potential but end up loosing 6-12 months down the track.

Would we pursue it in CA, MS, or FL?

Cam,If you follow the post's on this site you will find the 50% rule - that most people seem to like regarding rentals.