There are similar houses with connected mother-in-law suites and what not, but not exactly the same situation.

You could still lose the property in an hypothetical law suite, etc. 

If you want to run a slum and just have a first line of defense in a lawsuit we don't pursue. 

This could also lower your risk of a lawsuit on either property.

PMC's cannot get liability coverage on a property they have no legal interest in.If there's a slip & fall accident and corresponding lawsuit, the PMC is uncovered.The only way a PMC can be covered, is by being added as an "Additionally Insured" to the owner's policy.FYI - this has nothing to do with fire coverage, only liability.Regarding your other PMCs that didn't ask for this, were they adding your properties to their master insurance policy and charging you monthly premiums?

I think the issues brought up earlier in this discussion is many people don't operate their LLC cleanly/properly and when they lose the lawsuit they find that they limited liability protection they sought via the LLC is actually not there. 

In case of a lawsuit will my partners assets be at risk as well ? 

@Mike Kerber I think a lot of the question has to do with the viability and stability of the HOA/COA. o they have enough reserves, are their any pending lawsuits, are there any special assessments coming up, how much are the dues, and lastly and most importantly, can the unit be rented?  

Any question around zoning, mother-in-law suites, ADUs, house hacking, etc., Denver's zoning department is my first call.

If you contractually agreed to make the payment on the loan so there are a lot of reasons why a sub 2 transaction is better left for those who have an army of attorneys and can withstand a lot of lawsuits for the average joe or jane out there those types of strategies are probably left for the experts in the industry as a whole.