You could go back to the Seller and advise that you do not qualify for financing at the amount noted on the contract due to the failure of the properties to appraise.

I'll have to see what my lawyer advises as well.

They are (presumably) licensed in California and should be able to advise you accordingly.

Your advise and thoughts are appreciated.

I would advise you to seek legal advice to guide you through the process. 

There is a book on the subject written by David Greene that you can get here on BP or on Amazon (probably cheaper).Unless there is another awesome market that you already know better than Atlanta, I would advise you to stay close to home.

I advise for gradual increases when things settle down. 

But when I mentioned to the rep helping me that I might use some of the HELOC funds to invest in other properties, she advised me to not put that in my application because I wouldn’t be approved.

Network with local title and escrow companies and they’ll advise you on how to make it work in your area.

I was going to purchase my first rental property and I want to make sure I dont create a nightmare situation.  These are my HELOC terms:

Assuming an appraised value of $225,000
1st
mortgage set up at $180,000 80%...