If you take a cheaper $80,000 property that rents for $1,000 a month, and you do a 75% mortgage on it, between your principal, interest, taxes, insurance, and maintenance reserve you will likely spend about $600-$700/month.  

I am applying the cash flow to principal pay down on the property, so we are gaining equity. 

I can sell and walk away with more $$, but then I have to redeploy that money, lose cash-flow and principal pay-down from a tenant.I decided to take out a HELOC ~85% LTV, keep the home (it will still cash flow) and use the HELOC proceeds to purchase further investment opportunities.

To make a 1% minimum monthly payment, you are paying another $343 in principal, and it will take 20+ years to pay it off (I haven't done the math, but your statements will show you this.). 

What are your thoughts on leveraging the first few on 15 year notes, then using your W2 income as well as the rental income to pay down the principal faster, then buying them in cash once you have a few properties paid for? 

The return wouldn't be exceptional but it would be paying down the principal with a little cashflow. 

I am looking for Top 3 single family rentals markets in USA with Annual returns of 25-30% ROI with Cash on Cash return / Principal reduction and appreciation . which top 3 markets will you invest with that annual returns ??

He truly gets mailbox money and it spreads out his tax hit over 3 years instead of all in one year.The best part for me in the deal is the $700/month I pay him, $650 goes to principal buydown and he gets $50 month  in interest.

Ouch.It eventually evens out, as you will no longer owe taxes on the principal portion of your future payments, but it's not much consolation for you as an investor.

If buyer defaults on loan then banks need to recoup principal on subsequent sale.