I could lose that money.

Well, if you run your business into the ground and lose a pile of money - then yes, you will also reduce your taxes.

I am not rewarding bad behavior, I am trying to hedge against my investor losing more time and money. 

This creates separation between your personal assets and your business.For example, let’s say something goes bad with your rental and you get sued and lose.

I tried to hire a lawyer but I could not afford cost of litigation, on top of losing 200k.Scamsters like these give bad name to RE industry and keep people like me away from investing in it.

If you're a long-term player, you should look at the I35W corridor. 

Time can be the difference between winning and losing a deal.

@Michelle EisenbergNeedlessly Losing money everyday is always a legitimate reason to worry .

Yes, of course pretty risky however if you are saying it will cost $15k max to reno a condo.. there is no way I can lose.

Thanks - we have not secured financing yet....right now we're trying to figure out if we should secure on our own (wife and I) or secure through the LLC.Our worry is closing on this home and then losing the ability to purchase a home where we move (or the interest rate becoming jacked up due to that potentially being a "2nd home" in the lenders eyes.)