I submit rental property and license application. 

I can tell you that if the properties are deemed condotels, then one pitfall would be financing.

Yes you can get higher rents with section 8.It depends on the applicant and sometimes they don't qualify for the max HUD rent.I have 4 section 8 properties and it has been good to me.

I offered two offers initially, a conventional mortgage offer and a seller financing offer.

After you have your personal finances in order, I think house hacking is the best way to go.

If it went any higher the argument for renting would become even stronger.The opportunity cost of tying up all that cash, time & energy is almost never worth it.One of the only times it makes since to finance your primary residence is when you know you are buying a property substantially under market, and reselling it.

if you don't mind roommates, consider a house hack to off set the mortgage costs. if you do that, get leases signed by those roommates as it'll help your financing picture for the next property as you'll have shown the ability to operate as a landlord.  

A vast majority of them have 100% equity which is a beautiful gate to seller finance which I feel will be the most profitable.

It takes time to learn and configure it for rentals, it's just not nearly as good as a tool that is custom-built for managing rentals and rental finances. 

My question is, whats the best way to finance it- I can use the HELOC for down payment for a conventional loan, but then how would I have the funds for the rehab?