And that would certainly leave you in your current property long enough to get the tax free benefit of the primary residence exclusion.

Following for personal benefit as I am in a very similar position.

Was it buried in the part of them avoiding you, not returning calls, canceling meetings, and giving the appraiser trouble, all to their benefit and your detriment? 

I know rents are always going up, it will appreciate in the long run, there's tax benefits and there is definately room for potential value-add.

Is there a benefit in having the properties mortgaged with conventional financing and then going to a commercial lender for a blanket loan?

You will still benefit from having a paid off house (aside from the HELOC). 

I guess the upside is this young lady seems to be honest and could benefit from an ESA, I am highly annoyed by people who do not have the need and try to lie their way in with fake online registrations but this seems valid.

If you don't need the additional income, looking to generate long term wealth, tax sheltering benefits, etc buying for appreciation may come more into play.

, I'll just gift them with a really nice and juicy 1099 so that it screws up their tax return and other benefits income.

If you don't, then I probably will benefit from that same appreciation as well.Rent control, eliminating no-cause evictions, inconvenience payments, those crush values much more readily and to a greater extent (usually) than a bubble burst -- there's no way to work around them and there's no opportunity to take advantage of.