Plus you have the benefit of having 2 rentals in the same location. 

If you aren't thinking you'd be doing another rehab in the six month seasoning period, then the HELOC really wouldn't be of any benefit to you, you'd have no need for that cash until you can do the cash out refi anyhow.

Buyer gets to come in with less cash, you get a tax benefit and your full asking price. 

I’m hearing that a corporation is better because there are so many tax benefits and loopholes (for lack of a better word) with a corporation.

@Sharon B. for my figures the only capital improvements pass on would be ones that directly benefited the residents as a whole: making a parking area, renovating the basement for storage, etc.

Those properties are being snached by house hackers who don't mind offering more then asking price since they use FHA and only have to put around 3.5 of down payment and use the benefits of low mortgage rates.

What are the benefits of forming an LLC/S-corp?

One of the benefits of a cash out mortgage is the ability to obtain a fixed rate loan that will not be subject to an increase in market rates.It really comes down to what makes the most sense for you. 

We are building and holding everyday and love the tax benefits.

The added benefit, however is, I am now slowly building equity in the property and my girlfriend gets her new kitchen.My next step is to refinance.