Is it worth setting up an LLC?

[Timothy Finley]

Hi, a family member and I are considering investing in our first investment property. I've read that forming an LLC to purchase the property is a good way to protect ourselves from liability. However, I also understand that obtaining financing for an LLC is often difficult (especially if there are no pre-existing assets or income streams). I'm told that we'd have to obtain a commercial mortgage which often requires higher down payments (up to 35%) and higher interest rates. We'd also have to personally guarantee the loan, which I could understand. I was also told that the most important protection from personal liability will be the insurance I purchase. The LLC will add another layer of protection, but the insurance will be the most important.

My question is this: Is it worth setting up an LLC and having to deal with higher financing costs, or do most investors purchase investment properties using residential mortgages and rely on insurance to protect themselves from liability? Any input would be much appreciated.