Airbnb offers $3M damage protection insurance (AirCover) if guests don't pay for the damages they cause, and $1M liability insurance if a guest gets hurt or their belongings are stolen.That being said, I too do not allow instant booking or most last-minute long-term bookings out of nowhere.

Quote from @Scott Tennell: For real estate investors who have worked with private money lenders, what strategies have you found most effective in structuring deals to ensure both parties are protected and the funding process runs smoothly? 

With some of my clients, I've seen discounts of 30% to 90%.Here is a real-life example: I invested in a $50K note; it was second TD but with significant equity (over $200K) protecting my investment.

Exactly that’s why I’m trying to figure out a way to take ownership or protect my investment as I’m taking over payments and do not wanna leave it under their name as they can just come back and take it

The tenants in the 3 bedroom rental aren't in a protected class but I do not want to get in any kind of legal bind. 

And yes this is a 1 in 1000 situation but plenty of other disasters could happen and having the right insurance policy is huge to protecting down side risk. 

So I'm guessing it might depend on your state laws and personal situation. and make sure you know of any sticky items that would eliminate the protection you get from the LLC.

What would you do to protect them?

what kind of investment was/is this  a little more detail may protect others if you think this person is a financial predator.  

It’s our responsibility to protect each other from harm and uphold the values that build trust and success.Unethical practices not only hurt individual clients but damage the reputation of our entire industry.