The property itself should bring in revenue ( even if you choose not to live in one side) and generally a bank will accept a portion of that rental income into the calculation. 

Do the calculations factor in default rates?

@Dav idWithout going through the numbers again, my guess is your calculation goes astray at the calculation of the Heloc costs.

Research market rents, carefully calculate expenses, and ensure you have a solid lease agreement.

The denominator in the calculation is your capital/equity and with no debt the return on your existing equity is low.

So eventually this negative cash flow property becomes cash flow positive and pays for itself including property taxes, hoa, mortgage etc.Trying to calculate how bad is my investment here or should i sell out if there is appreciation 

Many “wholesalers” get all excited when getting a property under contract only to discover that a thorough inspection by a knowledgable professional results in repair costs 2 - 3 times higher than they calculated. 

Most lenders require proof of someone else paying the note for around 9-12 months so that the debt isn't counted in their DTI calculation.

BiggerPockets also has a calculator to analyze deals, and I highly recommend you start this as soon as possible, even if you are not ready to buy.

Here's a bit more in detail about how rates are calculated for DSCR loans:1.