For example each property may only be worth $200,000 and 10 of these properties are collateral for one $800,000 loan, while each property would be upside down and seem to be over encumbered but combined they are only at 40% LTV....

It has been a great rental, however, now the property needs to be modernized.

With that, once you move you can rent as is, or modernize the property and increase the value, getting higher rent.

Not a good combination.

I ended up remodeling the kitchen and removed a wall and put a beam in its place and modernized the whole house.

Most often there is one outlet per room in the older houses and this will not be adequate for a modern family. 

Yes I am aware that rates can fluctuate and many people say only to use this for short term but I also know lots of people who have used this strategy for long term with success, just slightly riskier I guess.Option two: Get a cash out refi on my primary house which I could get somewhere between 120k-140k and use this money to fund the downpayment and other associated costs.Option three: Use a combination of either option one or option two PLUS pull some money out of my 401k to aid in a larger downpayment.

It is difficult to combine IRA funds of different tax types such as SEP and Roth, however.New construction for immediate sale is a business.  

@Nando Gapasin:CapEx and Repairs are low. 15% combined is safe.Taxes and insurance look very low...very, very low.

Bottom line it is a combination of things: what syndication CPAs does and how your CPA decides to best utilize it for your personal case.