You have to have some cash, an entity and a decent credit score (over 650), but it's doable. 

What are typically the best places to open a Line of Credit on a home?

I had zero credit, and we didn’t have the two-year income history needed when you are self-employed.

I made it clear in an addendum I added to the lease that it was an unfinished basement and any and all improvements that they want to make or do make have to have prior written approval from me or my husband as well as permits and insured licensed contractors for electrical, plumbing, etc.

In order to improve that return on asset you have to either leave the market to go where you can get a better return or you have to leverage. 

Also, I would need to know who’s credit and guarantee is involved as I would check the applicants background before approving an application.

My current credit score is 650.

If the improvements made were substantial then I might also provide invoices paid to contractors as well as a scope of work to justify financing at a value much higher than my initial purchase.10% vacancy is definitely higher- if you've got a stable property that meets your markets rental demands then I would use your market's going vacancy rate (which may not be representative of your EXACT asset).

I keep hearing that I should keep my first loan on the books for 5 years...My question is; Will it matter (as to building credit) weather or not it’s the same loan?

We have good credit (by any standard) and a decent bank account (by college standards) but not enough to put down the standard 15-25% most HML and private lenders prefer.