An LLC is useful for two things: anonymity and legal protection.

@Brittney YangFor the actual legal document, get an attorney.

. - Taxes are on the higher side at $6,000 yearMy Numbers: $115,000 putting 20% of my money $23,000 and finance the rest with total expense of $1,834Monthly expense numbers: Future Maintenance 13% $273 - Vacancy 5% $105 - Property Insurance 5% $105 - Property Taxes 23% $500 - Property management 10% $215 - Office/Travel/Legal 4% $84 - Mortgage 26% $552 - Monthly Cash Flow - $316 per month or $3,792 per year so Cash on Cash = 17%I think this looks like it is a deal worth doing and I also believe I can bump the total rent up by $50 each tenant which I think make it even better.

What is the legal mechanism?

Read my book, Brandon's book, or Every Landlord's Legal Guide by NOLO and learn how to proactively manage your property well. 

That is, they take the arrears, the late fees and any legal fees and they create a 2nd.

LLC's main benefit is from a legal perspective.

Any legal issues I should be aware of in this situation? 

If you need financial help, ask under the "Finance, Tax, and Legal" forum.

- Also, what is their networth, so they are legally collectible for the guarantees?