I am a newer investor and strongly thinking about selling my rental and using the cash proceeds (net ~$170k) to begin BRRRR'ing in the Midwest.

Would this cause a court to see myself and the LLC as essentially the same entity?  

Whether you're retiring at 65 or 85, having access to tax free refinance proceeds and decreasing your cost of capital by 200 basis points is a no-brainer.

Also, @David M. mentioned it would be a good idea to get your brokers approval too before proceeding.

I was thinking of going to the court house steps and basically see if i can get a good deal within 20k, what do you think?

This leaves the seller and their property disclosure the only thing available in court when they fail to disclose that foundation problem. 

If you don't mind handling calls for property questions after hours, or going after rent, or time in small claims court, that you really don't need one. 

Second you must use all of the net proceeds from the sale ($ 700K minus any mortgage payoff).  

This was true before the material inflation, but more so now that the material inflation has cause the garage ADU conversion to increase in costs significantly.Before proceeding with the garage ADU conversion make sure you can find multiple comps that show that it is a value add proposition. 

If you're going to be getting financing from a partner, I think it makes sense to start courting potential partners and start hunting for deals.