Quote from @Scott Tennell: For real estate investors who have worked with private money lenders, what strategies have you found most effective in structuring deals to ensure both parties are protected and the funding process runs smoothly? 

The tenants in the 3 bedroom rental aren't in a protected class but I do not want to get in any kind of legal bind. 

There's no way to guarantee things won't break, there are only ways to protect yourself financially so you can replace those items.

It’s our responsibility to protect each other from harm and uphold the values that build trust and success.Unethical practices not only hurt individual clients but damage the reputation of our entire industry.

But it's difficult for me to just hand over money to someone I've never met, when I have so many friends (and have read so many stories here) who have been ripped off by contractors.How can I protect myself?

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So I'm guessing it might depend on your state laws and personal situation. and make sure you know of any sticky items that would eliminate the protection you get from the LLC.

Hire a licensed and insured electrician there are codes that are in place to protect people and property it is a safety risk that you should not cut corners to save a few dollars on.

The big one to read up on is the NYS Housing Stability and Tenant Protection Act of 2019. 

I only ask because the main purpose of an LLC is legal protection, and if you don't have a large amount of assets to protect, say less than $1M...you may be putting the cart before the house, and it may make more sense for you to focus more on finding and closing more deals.