It seems thh pitfalls in there residential and commercial auctions are sightly different. 

Pitfalls to avoid?

If so, please share with me your experience, pitfalls, horror stories, etc.2.

I feel like now is the right time and with your help maybe I can avoid some pitfalls. 

By doing this, I get all the benefits of rentals without any of the pitfalls of management.I start all my "rent to owns" with a 2 year straight rental before going into contract.  

I clearly understand having as little as possible of my personal money involved/at risk is an advantage, but what are the other pitfalls or upside that i may encounter with heloc purchase rather than bank loan?

It would be a decent rental although the money could be better invested elsewhere for higher return.Any other advice or pitfalls to avoid would be greatly appreciated.

A mentor will help you avoid pitfalls....and they're earning a piece for their help.

I'm aware of the potential pitfalls and drawbacks as far as penalties go, as some states regard this as illegally doing business and I also don't want to file as a foreign llc.

Also, there is a channel on YouTube by a guy named Travis Everette who breaks it down into real-world situations and warns of common pitfalls while taking the exam.