Is this because they won't count rents on the two duplexes towards your DTI?

Would we then have to acquire at least $100k in debt on the new property or does the HELOC not count toward that and we would only have to acquire at least $87k?

That's a 40% for, not counting net rental profits etc.  

Can't the income from individual room leases count when considering DTI?

Neither.You are giving away money with a 10 year mortgage, and zero cash flow defeats the purpose of being a REI.

With a lease to own contract could I pay them $17,000 per year towards equity in the home and have that count as a tax free gift so they are not taxed on that amt. as income?

Don't burn out, if you feel yourself getting down and defeated, take a step back breath then try again.

Started when I was 37 I am 40 now and now I am up to 13 units and counting have a plan and do not waiver from your plan, also build a good team to start and then look to improve and expand on the team.

Can I take these as deductions from my taxes since this money is invested in starting a business, or would it count as a personal expense and can't be written off? 

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.