In practice, separate entities should be separate.

I practiced in front of a mirror and my family for days.

If a legal issue arises with Property 1, only that property’s assets would be at risk, protecting the equity in Property 2 and any other properties you may own.Asset Isolation: Isolating each property in its own LLC helps protect your assets from creditors or lawsuits targeting a specific property, thereby providing a more robust legal shield.Financial Management and Bookkeeping:Regarding your concern about financial management and the practicality of handling multiple LLCs:Centralized Banking: Using a holding company’s business account and credit card can simplify your bookkeeping.

I suspect an Bk attorney would advise you that you don't qualify for a BK.I suggest you consult with a very good real property attorney, preferably one who practices in the area the property, or better yet the foreclosure Trustee is located. 

Does anyone know how it works and best practices?

We frequently hear investors chasing properties that meet the "1% rule" which in my opinion is a  flawed underwriting practice (have posted on that very subject a few times in these forums), but in order to achieve a 14% cap rate your Gross Operating Income must nearly meet 2% of the assets cost assuming your operating expense ratio is at 35% (which is very lean on operating expenses).

Are there any resources, legal advice, or best practices you would recommend for pushing back against overreaching regulations?

I feel like they are making closely-guarded secrets available to "the rest of us", for a price which (FOR WHAT THIS IS) is practically giving it away!

Is this a common practice? 

Spike was as a result of Trump tariff on Canadian lumber dumping practices and Covid shutting down logging, lumber mills and trucking.