Sorry but the LL royally screwed up and now is paying the piper for being a completely absent LL.

However one thing I didn't anticipate was, while the aged sewer line could easily hand two people living in the property, when my tenants moved in and when the load on the sewer system went to five people, it couldn't keep up.Turns out the line had been damaged over time (orangeburg pipe) and was too narrow, so I had to pay to get it replaced. 

I would probably focus on a single STR (if that was the route you went) and find something of slightly higher value for a larger proportion of accelerated depreciation. 

And yes, that requires you to collect and pay taxes but if you use Avalara/MyLodgeTax it’s really pretty easy to do

If you not tied to a specific location, the Midwest would also be a great place for STR without paying California house prices. 

Make sure you pay attention to the comps to see how you need to rehab your properties. 

Should I require both of them to pay application fee or only one fee?

Right now, it seems your focus is to invest, but that's it.

If you do pull out money from the HELOC, have a plan to pay it back within 18 months.

I’m assuming the goal is to have your REI Cashflow pay for and keep up with, or even improve your lifestyle, way before you retire.