Note that I'm not an attorney, but the sale of the asset shouldn't qualify any disregarding of the lease, which is also an asset. 

Disregard!

IRS allows you to treat a single member LLC as a "disregarded entity" meaning you can treat it just like your personal properties for accounting and tax reporting and still have a layor of asset protection.  

If something is illegal, I don't know how anyone except those with disregard for the laws can defend the action.

LLCs are a disregarded entity for tax purposes, which in addition to directing which person or parent entity pays the LLC's taxes, also directs who or what is ultimately responsible for the mortgage (assuming you're not able to land non-recourse debt).I'm not a currently licensed CPA or attorney, but I'm surprised your people didn't approach the problem this way.

Married couples can file a multi member LLC as a "disregarded entity" on your personal return as long as long it is wholly owned by both of you, you file a joined return, and you live in a community property state.

Another thing - most listing agents and sellers would completely disregard a letter of intent.  

But in my mind, spending time to buy properties which cash flow - completely disregarding any potential appreciation - is a similar kind of "safety insurance".The danger I think is when people come into the market because they think "real estate is going up" and they expect appreciation, without looking at fundamentals (cash flow).It's the real estate equivalent of someone looking for a hot stock tip - they want the rewards without being willing to do the work of educating themselves, doing real investment analysis, and choosing their investments carefully - the "stupid money" as you said.Right now it seems that values are coming back, but real incomes haven't risen, it's really driven by a little more demand due to people feeling their jobs are more secure than a few years ago, combined with still-tight supply.I think what we're going to see over the next few years is that builders will step up to the plate and do a lot of building.

Disregard the numbers I see all these markets as pretty much the same its just what you are looking for on the appreciation and cashflow sliders.Indianapolis, Kansas City, Texas (Dallas/Houston), Atlanta, Chicago, Birmingham, Ohio (Columbus), North Carolina (Raleigh), Memphis.NOTE: Analysis was done with my state of the art software...

Each LLC has its own insurance, and my main corp has an additional 4m umbrella in case of any liabilities from my disregarded entities (LLC properties).