That's the most extreme example but (hopefully) illustrates the point.What I worry about for a lot of investors (paralleling this) is that they want to use an LLC as a way to get around umbrella coverage.

As illustrated above with this one case, I think you're blowing this out of proportion.

Here is an example to illustrate what I mean (using round numbers for clarity, but would work with any figures depending on the investor's materiality threshold): Let's say I have 4 properties each worth $500K and I have 25% equity in each (total of $2M in property and $500K in equity).

A further illustration that air sealing is rarely done well ... or, in this case, at all.

By your answer Im hoping to create an illustration of a potential worst case scenario for this type of investing.

To illustrate say you have 15 properties making $400 each.  

This is a great thread and it illustrates that there are multiple ways to make money in Real Estate.

And @Ronald Rohde wins the thread with his succinct illustration of why you need a good attorney on your team!

Which are pretty conservative numbers.Stock first because it's the easiest:Purchase start: $30,000Trading fee ($7).Dividend (3%) = $900 a year or 4500 over 5 years.6% appreciation over 5 years your investment is now worth:=FV(0.06,5,0,-29993,1) = $40,137.40 - $7 for selling so $40,130.4You've made: ($10,140.4 + dividends) or $14,640.4So, to come out better, you need to make at least $14,640.Now Rental:Purchase price: $150,000Closing Costs: $4000Cash Flow: $200Cash Flow for 5 years ($12,000)Sell Price: $159,000 (6% appreciation)Mortgage amount after 5 years (assuming 5% 30 year mortgage): $110,378.75After RE Commission of 6%: your appreciation is wiped out, so you still sell for about 150KCost Basis with depreciation recapture: 130K ($4300/Year)Taxes owed on Deprecation recapture: 5K$150000-110.378.75 = $39,621.25 - Taxes for depreciation = $34,621.25 - original amount = 4,621.25 + Cash Flow = $16,621.25I know my math above is not perfect, but it's to illustrate a point. 

First, let’s set the stage to illustrate why the appraisal deserves some thought.