If you plan on buying a distressed building with tenants on it, I would just make sure you factor in the potential for issues in your purchase price.

Factor in principal paydown.

I don't factor in the appreciation in my calculation because I do not receive it during the year and it would technically affect both side of the ROE.I could pull the equity back out and use it for living expenses and just let the rent cover the loan. 

Would factor that benefit in to your analysis.

Not ideal but I guess that's why we factor in contingencies when doing renovations! 

This will be one of your factors.Another factor is utilities, do you have utilities on the main street, or you will need to spend a lot just to get utilities to your site?

But I mean I know there are $150k properties out there in the Midwest and I believe $200k to $250k properties are also attainable with all factors considered - imagine with 3.5% down payment through FHA loan, you only put down $8k to $8500k. 

If it needs as much work as you say it does, paying 95K will mean your essentially buying it a full value when factoring in the repairs.

That leaves me with a couple options and I'd like to make sure my math is correct.If I put all $240k on the HELOC, we would have to pay it back in 15 years, and would currently come with a 3.85% rateThat would be a $1,760 monthly payment for the 180 months totaling ~$320k paidIf I put the down payment on the HELOC ($60k) and the other $180k in the mortgage, I would have a 15 year loan at 3.79% and a 30 year loan at 3.5%That would be a $1,250 monthly payment for 180 months and an $810 monthly payment for the remaining 180 months totaling ~$370kAnother factor I'm considering is the closing costs of getting the mortgage will be in the $1,000s, whereas the HELOC will be in the $100s.Is there anything else I am failing to consider?

Its a nice house with a pool, but in its entirety needs both internal and external repairs estimating around $10,000.