Of your two options, I like some version of #1......

One has a 4/2 upstairs and an ADU (2/1) in the basement, but they are not separately metered and doing so is not an option (also, yard is not divided). 

I recommend connecting with a great lender like @Zack Karp to discuss your options as a house hacker.

My other option would be to do a 75% LTV at 7.5% interest, but I would have to come up with $20,000 to pay off my HELOC or carry the balance on my HELOC and pay interest on that as well.

Still not clear if you had a joint venture agreement or a recorded mortgage with a note in 2nd positionBut sounds like hard money lender foreclosed and it wiped out a second lien.If you gave loan in that persons name vs LLC then you could still get a judgment and recourse but if it’s only LLC with no personal guarantee then your options are go after LLC only (and hope their are other properties in the LLC)What due diligence did you do on this person originally?

Also, think about hiring a property manager.Regarding the Florida ADU,Using a HELOC can be an option, but speak with a financial advisor to ensure it aligns with your financial goals and risk tolerance.

@Sumiya Mahmud Have you looked into some of the self managed software options?

If the asset needs updating etc you may be severely limited in carrier options until upgrades are made.

Sounds like moisture intrusion issue, both options suck.

For example simply filing a quit claim deed to transfer the properties to one entity (existing or new) would be easiest however that may not be an option if you have loans in place...