If you use it for rent, utilities, working capital, mortgage, inventory and everyday supplies you should be fine. 

Should my strategy be to spend on of out capital on the down payment to buy a more expensive rental with a large cost basis?

@Juan Alvarez It’s a case by case basis.

Hi @Andrew Martin, Unfortunately, most lenders, even the best that I use on a regular basis, have temporarily stopped lending on investment property refinances due to their current economic situation.

This particular property is intended for the couple to live in it probably on a permanent basis. 

The key is to communicate with each investor on a frequent basis.

My ultimate goal is to find a house with a good tenant to generate cash flow on monthly basis.

I speak to landlords almost everyday and their rentals are renting in 1-2 days of being on the market.  

These are my HELOC terms:Assuming an appraised value of $225,0001stmortgage set up at $180,000 80% loan to Value (LTV)HELOC (Home Equity line of credit) set up at $33,750 15% (LTV)Combined loan amount $213,750 (95% of the appraised value)Interest rate 1st mortgage 3.875% 30 year fixed rate conv loanHELOC interest only ARM: WSP + 1% (3.25% Current WSP index + 1% = 4.25%) Principle and interest payment would be $846.43Full monthly obligation including Home Owners insurance ($100 per month) and Taxes ($100 per month) : $1,046.43The interest only payment on the HELOC assuming the full draw of $33,750 at 4.25% would be $122 (shown above) Total monthly obligation between both mortgages : $1,168.43~$25,000-26,000 – would be the cash available from the HELOC at closing What this refinance accomplishes: ~$25,000+ out in cash for the real estate investment opportunities Escrow refund – should be a wash with what we are estimating we would be setting aside to start your escrow (~$1,200) and that is your money to do with as you please Creates a HELOC that you can tap into on an as need basis (during the draw period which is the first 5 years).

But again, I'm absolutely a newbie and still learning so much everyday so need to do more research!