In addition, focus on the true decentralized side.  

So the only difference I see is that I have to pay an additional origination fee of 1-2 points on hard money.

A few additional things to consider between the two loan types: prepayment penalties, probability of closing, points/ fees.... and vesting (LLC or personal). 

Would it be advisable to sell one of the investment properties to finance this, or should I explore using a Home Equity Line of Credit (HELOC)?

Real estate websites such as Realtor.com, Redfin, and Zillow can give details on recent sales in the area.Use Real Estate Investment Calculators: Take into consideration utilizing additional online real estate investment calculators in addition to the BiggerPockets rental property calculator.

I also see that some have additional reader fees that come with it. yikes! 

Should I add it as an addendum? 

The goal was to initially do a small renovation and add an additional room and bathroom to the already existing older home. 

I do wonder if I leads to more inventory though, I have for instance another client that this 2.5% might be the difference in deciding to list or not, for sellers without a lot of equity that 2.5% can be the difference between writing and check or not, which in addition to some people not having the money to cut a check is also a huge psychological barrier, there are probably even some people on the margins who have in thier head they will only sell if they can net 100k in profit or some random number like that.

If you want to protect your friend's capital as if it were your own, you'd want to:1) Secure the loan with real estate in the form of a deed of trust or mortgage (depending on the state the property is in)2) Obtain property insurance binder with your lender as an additional insured3) Obtain a lender's title insurance policy protecting them (different than an owner's policy) and transfer all funds through an escrow closer or real estate attorney (depending on the state, the requirements for closing may differ)4) Use a real estate attorney who also practices private lender law in the state the property is located in.