Bank got the judgement and now own?

The HELOC terms differ from bank to bank, obviously, but I was under the impression that I would be able to secure 100% of my equity and I was wrong.Not sure what your current situation is, but have you considered house hacking as another method to finance your new purchase or pay down your current house?

You also need to take into account how your approach will impact the tenant and what response you are likely to receive.It would be helpful to know what city and state the rental is in, as landlord-tenant law varies per jurisdiction, so what works in our area may not work in your area.So, at the start of tenancy the tenant's parents paid the first month rent and security deposit.

Rental real estate investing is so incredibly simple at it's core it's insane how many people out there are screwing it up.You buy a house with the bank's money & your tenant pays off the bank.

The formula is simple and is as follows, 75% of gross rent - PITI = net rental income.If net rental income is positive its added to your total income and improves your purchasing power.If net rental income is negative then its considered a liability similar to a credit card or a car loan that you gotta qualify for.Some banks have "overlays," or additional requirements they place on top of borrowers when you have rapid acquisitions of multiple properties but by no means is 2 properties in one year considered "rapid," by most lenders, however 3-5 would be its an underwriter and case by case bank "call," to make. 

Is there another way to find out which local banks do commercial loans that meets this criteria?

If your using financing the bank requires this.

And 2) I have heard there are challenges to refinancing with a bank under an LLC?

Much like "ratholing" in poker where the player takes his chips off the table and ends up only playing with the banks money. 

Typically you will want to work with a direct to FNMA lender that doesn't have any overlays, but smaller community banks or credit unions that service their own loans could work as well.