Nonetheless, I am not out to impugn anyone's intentions and I do understand (as Jay rightfully points out) that the self-employed (my situation for the past 20 years) especially run into times in their lives when conventional lending sources are of no use due to limited reportable income and other factors (such as when, for example, you retire in your 50's and begin to live off of your lines of credit, etc.). 

As long as you have the insurance liability, property and flood if you are in a flood plain.

Most will go to 80% of the value of your property, some limit to 70% max.

Haven't had any issues, but I am worried about liability should something happen like a fire. 

I don't think you are going to be able to get insurance for two separate living units in a single-family when they are both illegal and likely do not have the correct egress windows (basement) for fire safety which could subject you to huge liability if something happens to either party.

This event is free but has very limited seating and we are limited to the first 50 to RSVP!

As far as being expensive; if the tax liability is not large enough then yes I agree, however, it depends on what is being sold too.

Also make sure to have owners add you to their property insurance policies, so you have liability protection. 

Otherwise, you may be limited to doing deals that are less than or equal to the equity in your home, and miss out on some bigger opportunities.That said, fix-and-flip loans will have higher fees and interest rates than most HELOC's.

This will allow you to take on bigger deals with your cash on hand.LTC is a ratio with the potential to limit your loan amount.