If you do an HELOC for an LTV based upon you living there (say 95%) and then a few years later the bank finds out you aren't living there they MAY reduce your LTV (say 75%) on your HELOC.  

its very similar to tenants that want to do work on the house for reduced rent .  

There is also always the option of finding a partner who can already bring some of these things to the table and could help reduce your risk when doing your first flip.

Someone came in and bought it out from under us, and at a pretty reduced price that we could have done.  

If it would not cover both payments I would take the 30 year mortgage to get cheaper payments and just try to pay it off early by making additional payments to reduce the principle by them if I did not have to come out of my pocket to do so.  

My initial interpretation was that i could reduce my non qualified use by 2 full years, and you could reduce yours by 5 years but my second reading of more detailed IRS explanation calls into question my interpretation if you go beyond the 2 or 5 year boundries.  

orOption 2:  Collect it with other excess CF, and spend it to reduce the cost (increase CF) of the leveraged money on a future property?

Are there other loan options beyond a 30 year conventional mortgage I'm not thinking of that may be able to reduce down payment from the typical 20-25% amount?

The price is at 1.7M still (hoping I can get it reduced to 1.65M.)  

There are two ways your PMI gets reduced:1) you pay down the mortgage to 80% of Initial purchase price/appraisal2) When basing PMI on removal of a Current appraisal; you have to get to 75% within the first 5 years, 80% after 5 years.Standard Fannie guidelines.