An Issue that might pop up is if you have lived there less than a year following the HELOC at which point they could close the HELOC.Other than that it is a judgement call on the part of the lender as the loan was made as a Owner occupied and if they want to they can close it.

I still think the landlord should get paid, but the judge issues a judgement to the tenant for the dollar amount paid. 

You will need to find out what, if any, liens and other judgements are recorded on the property that you may need to pay off. 

No judgement here by the way, you should trust your gut and your gut is clearly telling you that you should not rent to them. 

It's not money for nothing (and your chix) for free.You will have to spend time working at it.You should ask yourself--is doing the things I need to do to operate this rental business, and taking the financial risks I need to take the right thing for me.Also do you know enough (in your judgement) to be able to start in on this yet.For instance, do you know what a P-Trap is, what about bug control, do you know how to legally evict someone in your town, and do you have money set aside to do this and also to "Turn" the unit for the next customer/renter while still paying the mortgage?

In any case, take it one step at a time, find good resources, take imperfect action, and use your best judgement.

@Amanda Thompson Sorry you got taken by these Aholes, hopefully you get to keep that deposit.But one thing you can do is try to get some kind of judgement (Small Claims?) 

You will get an easy judgement, but then what?

For example, a garage on the property line (I still bought it, but had budgeted to tear it down), improperly discharged previous mortgages, improperly documented foreclosure judgements, and a strip of land that wasn't included accidentally (causing the property to violate setbacks). 

Bear in mind however, that getting a judgement means that you still have to collect.