In theory you are better protected with the LLC, I'm speculating but if you screw up really bad and somebody dies on your property due to your negligence the LLC or individual ownership is not going to matter, you're going to be in a world of hurt either way.

Hoping that the value increases is speculation.

You are speculating on appreciation.

I understand the bank being concerned if they deem the HELOC is being used on a speculative investment that may be at risk during a downturn such as a spec home or flip, but do you think they pose the same risk if he were to use it to buy lower end rentals below market value with equity most likely already built into the deal?

I don't think that a 12% cash-on-cash return deal would be particularly difficult in today's market, provided that you are focusing on rental returns and not, say, a speculative play in a high-appreciation, low-return market like San Fran, DC, or NY. 

You want fast, you are closer to speculating than investing and your risk skyrockets."

Andrew I am a west coast broker like you CA OR and my wife is WA.. and this subject gets batted around on BP a lot .. so I got tired of all of all the speculation .. 

The below is pure speculation; I don't work in "loss mitigation" or have any insider scoop on it.With interest rates as low as they have been since 2012 or so, and given where appreciation has been, and the fact that when/if a home sells the title company will require that the lender (plus back interest) be paid off, it's possible that the 'rational' thing to do is let the interest accrue on the assumption/hope that there will still be equity in it at that point when someone dies/divorces/etc and sells. 

I can only speculate why somebody is going to contact me vs someone with cash but a few things that come to mind are that the person buying with cash might not be as reliable, s/he might have their cash tied up in another property/properties already, the deal might be too small for them, it might not be a suitable location for them, maybe not the right property for them i.e. condo vs SFH, and so on and so forth.

Isn’t that all speculative?