May not be legal, but doesn't seem like it impacts your situation here. 

For both short- and mid-term investors, the market's diversity and relatively lower entry costs make it an attractive option.FYI - Philadelphia has a tenant-friendly legal environment, which can present certain challenges for landlords

4) Legal Options: who told you that you can't sue the LLC owner?

I would suggest to check with your local laws first.Most likely you will need permit ( I guess you can get away without, obviously not suggesting that :D)) but possible) , also check your zoning.If not possible to create separate unit legally, I suggest not putting an oven in the basement, and rent it without, or live in it yourself

If a rental/lease contract is a legally binding document...enforced by collecting rent...or enforced by an eviction process if rent is not paid....then can there not be a document (legally binding) for a tenant to sign that would relinquish their rights as a squatter or due process of eviction...

I dont want to deal with legal issues down the road.

I am paying for all treatments, but they are asking for rent reductions etc. after legal advice from a connection they have that has been giving them legal advice. 

But all of these investments operate under highly regulated and constrained exemptions to securities law, and I have been told it is very difficult to do the above legally.

You want to get her out as soon as you can with whatever legal means necessary or it will never end and everyone else will move out.

Specifically, we'd like to understand:Liability Protection: How does each state's legal framework and case law compare in protecting our personal assets from liabilities related to the property?