I've had many rentals in CA and Ohio for over 20 years, solid liability insurance for the properties and umbrella insurance for outside risk (if/as necessary) has been way more than adequate and worlds less administratively burdensome (plus you don't pay the annual $800 fee for each LLC you own that carries on business in or out of CA as almost all do under the incredibly wide scope of CAs franchise law).Sounds like they are selling you a real Rube Goldberg special, one that's likely unnecessary for basic small landlord activities.

The other thought was to get an umbrella insurance policy instead for this 1st rental and possibly either expand the $$ coverage when additional rentals are paid off or then setup individual LLCs for the multiple rentals. 

. If you opt not to use an LLC though, make sure you have good insurance in place, including an umbrella policy.

I would suggest talking to your insurance agent about an umbrella policy if you don't already have one.

If this is a home that you rent out and do not live in, typically you would just get a landlord policy (also referred to as a dwelling fire policy).You can also get an umbrella policy to cover you over and above that, and that’s a separate policy (which is usually pretty cheap).Your insurance agent should be able to advise/quote you on the best coverage. 

The intent is to cover as many units (in the future) under the same entity and be protected (umbrella insurance?)

If you are looking to buy in an LLC, I'd consider buying in your own name, getting the lower interest rate and adding in more liability coverage (property+umbrella).  

@Zack Karp thanks seems to be that way, I’ve seen a lot of other posts and articles on BP with added umbrella liability to get protection on personal assets so I may go that route.

My mentality now is that I can just carry good insurance coverage on each property along with a massive umbrella policy which pretty much should cover anything under the Sun regarding litigation. 

Don't try and take shortcuts in life safety issues.Carry an umbrella liability policy.