Thanks for the eye opening reality check Nick!

Well, you may not like what I had to say, let's get to reality and follow up the right way, good luck with your possible deal and this buyer pulling your poor investment out for you. :)    

Whether or not the second property becomes reality is yet to be known, but we decided to switch over to conventional finance since the rates were still low (4.375%) then we would still have the heloc free for other opportunities.

In reality, we want to rent out the house as soon as the new one is finished and continue on as a long term rental.Has anybody been in this situation before?

I too agree with @Nicole W. that too many go straight to the LLC and feel protected while in reality a good umbrella insurance policy will meet your liability protection goals. 

Limited cash very possible, no cash not much of a reality.

You can ask questions till the cows come home, you'll get comments, but until you understand real estate and valuations and contracts and financing, it will still be hard to put spotty comments into play in reality.

As Tennants in Common each of you own in reality a piece of real estate that is a specific % of a larger piece.  

I also know how earthquake insurance works (or doesn't work, in reality) I don't know about tornados, hurricanes, monsoons, tsunamis or anything else!

That's good to hear the realities of the pros and cons of Section 8.