The only downside of a HELOC is that if the market is to take a poo the bank can put a stop on your credit line at any time.

Is this a limiting factor for me since the city location is not the biggest factor?

Having options other than just selling a losing choice, limits your downside, while providing additional upside. 2.

Zoning is often the biggest obstacle to this. 

In theory this sounds like an amazing step to fix one of the biggest administrative nightmares in Philly real estate.

The downside is that there is not true separation between the Smiths and the legal entity that actually owns the property, which may create risks the Smiths sought to avoid when placing the ownership of the property in the trust or LLC. 

DTI will be your biggest issue in qualifying though, granted much more lenient on DTI (usually up to 50%) than an investment loan (usually under 40%).Last idea - give thought to downpayment assistance programs.

By far the biggest/nicest house on the block (1950's built)But why is it vacant??

The downside to sending renewals each year is you instigate the tenant to think about other living options. 

The biggest junk fees you need to watch out for are lender points, escrow fee and attorney fee.