@Derek Lacy summed up the situation nicely with regards to how the policy should be implemented when using an IRA held with a self directed custodian.I wanted to speak to the topic of your liability exposure personally.  

They may have exposure to sub-prime, but who doesn't, right?

This PSA limits your total exposure to the amount of the earnest money that you put down.

In my case, allowing people to have a direct ongoing exposure to real estate and cash flow on a passive basis without having to understand the intricacies of the industry.

My input will most likely echo input you've already received.Maximize the exposure to your property.  

And we didn't even get into the portfolio lender's risk exposure limits with a single borrower or single type of collateral.

Think about the 50% rule, if you have a duplex and one unit is full, your expenses are covered, a little less exposure to vacancies that way.

If you're operating on your own island, in complete isolation, you may not have the exposure you need to find real deals.

Not naming every exposure you have (meaning not telling about every driver, auto, home, etc).2. 

So much input; I really appreciate it.What I'm hearing so far, correct me if I'm way off track:Since I currently have few assets I probable don't need to form an LLC at this time;I have homeowner's insurance and a relationship with my agent, so getting an umbrella policy is not a problem;LLC is for asset protection and personal liability issues and something to consider when there are more assets to protect and more exposure as far as liability is concerned.Mainly what I have learned from all your generous responses is this is not something I need to let hold me back at this time.