I am thinking that he is thinking if the loan is not paid off at least the property is used as collateral if the debt cannot be repaid. 

When the property changes ownership, it will trigger the Due on sale clause or termination of the HELOC because you no longer own the collateral.

[See first tuesday Forms 442 and 443]Thus, the buyer is held harmless (by the seller) against any activities of the underlying lender, unless: the buyer interferes by triggering the due-on clause through further encumbrance, long-term lease, resale, waste, etc; or a pass-through provision shifts the due-on-sale burden to the buyer, as with late charges, prepayment penalties or future advances.The seller’s primary duty is to make all the payments due on the underlying loan, as long as the AITD remains of record and the buyer is not in default.If the buyer fails to make payments on the AITD note, the seller is under no legal obligation to forward his own funds to the underlying lender, or to protect the property from a foreclosure by the first trust deed lender.Even without the obligation to keep the first trust deed current, the AITD seller may feel compelled by the buyer’s default to advance funds to keep the underlying trust deed current, or else risk the alternative and allow his trust deed to be wiped out by the underlying lender’s foreclosure.Should the underlying lender call the loan based on the AITD transaction, the seller may be forced to use his own funds or borrow against other assets (or collateralize the AITD) to pay off the lender.

My conclusion, and this was a conclusion based on my own situation, was that both hard money and conventional debt should be present in my toolbox.I was able to find a bank that gave me a revolving LOC at 1% over prime, collateralized by a portion of my rental portfolio.

Basically you go to the bank and ask for a loan, offering the property as collateral, and in exchange for the lump sum of cash, you are required to make monthly payments on the loan (sounds like a mortgage right?).

Use cars as collateral, 3. partner with another investor, 4.

As long as the property being bought isn’t used as collateral then it’s ok, right?

They would be have a lien on title, as collateral, until I pay them off completely, correct? 

Is there a way to pull out equity and use it for a rental property without using my house as collateral?

You can use 401k holdings, stocks, RE as collateral for proof of ability to pay.