When you borrow funds, the funds and related interest are traced to activities that utilized the funds within 30 days of the borrowing. In your case, all your borrowings on the HELOC were used to acquire rental property. Therefore, the interest paid on the debt could be considered passive activity interest or alternatively you could treat it as home mortgage interest within the $100,000 limitation or a combination thereof.
If treated as passive activity debt, the interest is deductible against the rental income produced by the acquired property. The limitation of $100,000 on home equity debt does not apply, as the debt incurred for personal purposes.
If you use part of the HELOC for personal purposes, that interest would be allocated to home mortgage interest on Schedule A within the $100,000 limitation.
Home Equity Debt
http://www.irs.gov/publications/p936/ar02.html#en_US_2016_publink1000230008
