Several things to consider: 1) One of the main purposes of segmenting your assets into separate LLC's is so that your personal net worth or equity in other business ventures or properties isn't exposed, so unless you have a high net worth or a lot of equity in a property, it might not be worth bothering going the separate LLC route, especially when it restricts your financing of the property.  2) Most any commercial financing you get from a local bank for a small property is going to have recourse anyhow and require that you sign a personal guarantee, so you're still personally on the hook to the bank even in the case of a commercial loan.  3) If you're a newer investor and buying a deal that's tight on cash flow, or if you don't have a ton of cash sitting in the bank already, your greatest risk factor as an investor is your investment failing economically due to poor financing terms or not operating the investment properly, not because you get sued. 

However, I could use some advice on the best route to take (buy an investment property or a primary residence first).Some background on my current situation:1.

If you don't sell the 1st lien off, its a lot easier for the borrower to get refinanced out into a conventional loan in 24 months at only a 80% or less LTV (depending on appreciation and market values).I think we can agree on one thing though....no matter which route you go, you have to treat it like a business.  

You can double your money in one year if your property appreciates only 5%.If you are considering the OOS route, there are a few markets that have both cash-flow and appreciation you could look into.   

Already mentioned above, but for leveraging your current home for the other a HELOC is probably the route that would be best. 

.- Strategic Location: Close to major commuter routes (I-495, US-29) and public transit (Metro).High Demand: Inventory in Silver Spring remains tight, driving competitive offers for move-in-ready properties.Diverse Market: A mix of young professionals and families ensures a broad buyer pool.

However, there are substantial legal risks associated with doing this and most people who go this route have no idea they're taking them.

Even if I was in the middle of a big city, I would look at train station routes away from the city.3.  

For a passive route, private lending or investing in syndications/REITs can offer steady returns without property management.

There's no right or wrong way to do this, just varying levels of risk and the only proper route is the one you understand.