Definitely don't wanna get a bad deal.

Even then it should be gravy.On income it doesn't look too bad on the surface.

If you told the bank you were using the HELOC money to buy a rental they wouldn't give you the line of credit because there are way to many inherent risks. 

I did give verbal qualifications that were: gross income of 3x the rent and a credit score of 580.

After I was done pulling a permit for a garage conversion to give me a proper master bdrm, walk in closet, mud room and last but not least 2nd badly needed bathroom (it should be against the law to only have one bath in a home) I got quotes for a "rough in" for the toilet in the bathroom that were anywhere from 7k to 22k.

Often I find folks are running their numbers based on bad data. 

We currently have the below "bad debt" positions:Student loans - 50k (6%)Car loan - 29k (7.09%)2nd lien (current primary home) - 80k (6.08%)401k loan - 30k (9% - paid to yourself)401k loan - 20k (9.25% paid to yourself)Household income of 267k (not including bonus), roughly 100k cash currently and save around 6k a month not including yearly bonus's (33k + 14k = 47k net/yr) + 72k/yr (6k/mo x12) savings = 119k total net savings per year (rough estimate not including current rental)Should we pay off existing debt with the exception of our home loans (not including 2nd lien) or invest in a 250k townhome* that can rent anywhere from $2,000-$2,750/mo?

If you lose your job, or have a big, unexpected expense come along, you don't want to be selling those investments at a bad time, or scrambling to refi.

We can see the loans that you close on credit and the date it closed. 

Too bad that Lloyd's would not insure your buyers' property.