Asset Protection - Is "Equity Split" Best Rental Protection Strategy?

[Jimmy H.]

In my research of trying to discover the best asset protection strategies, I have come to a conclusion that an "equity split" (as I've heard it referred to) strategy is the best in terms of simplicity, cost and maintenance, and most importantly asset protection.

The strategy in layman's terms looks like this. You set up two LLC's. Real Estate #1 LLC is the entity that holds the actual real estate and operates to collect the rents, etc. Real Estate #2 LLC holds a note against those properties held in Real Estate #1 LLC for the gross amount of equity available. That way when someone tries to sue you there is no equity to be had.

I understand state and local laws differ and all of that good stuff, but am I on the money on this one as being the BEST for protecting rental income property? Opinions?

Also, how many properties (or rather gross value of the properties being held is perhaps more important than the sheer number of buildings) would you hold this way before establishing a new equity split LLC set up?