This is for basic informational purposes I am not an attorney and this is not legal advice.First, if you offer to purchase a property using a HELOC to fund the purchase you cannot later back out of the agreement because you couldn't find PML or investors.  

LLC offers better legal protection.3) Setting up in states that allow your identity to be hid is also overblown.

Hi Krista, Yes you need a broker's license to legally manage property that you do not own in CO.

And, the longer you wait to act, the longer the squatter stays - and even gains some legal protections to stay while your waiting on a slow court system to act on an eviction. 

Additionally, regarding the legal structure, an LLC seems to be the most suitable option for our situation.

For long-term planning, consider transferring the property into a trust to manage tax and legal complexities.This post does not create a CPA-Client relationship.

Hey Santosh,As of right now you're extremely exposed regarding insurance and I'm going to assume legally as well.If the home isn't registered as a legal multi-family with the town that's something you'll have to correct ASAP and make sure the home is up to code.Insurance wise as soon as they find out what you're doing they'll cancel you as the risk has changed from a single family owner occupied home to a multi family owner occupied home.

I will preface this with the fact that I have a legal background, specifically with estate planning and asset protection.

Quote from @Aaron Zimmerman: I would look for other ways to legally reduce income such as cost segregation studies.

Hi @Kenzer Hodgson to @Sarah Kensinger's point above, I'm not a fan of so many people spreading legal advice/insight on the forums, but at least it's better than Instagram/Facebook and YouTube.