To reduce lawsuit potential1.  

we're trying to be better humans than operating this under the radar and ticking off all our neighbors, not to mention potentially opening ourselves up to lawsuits or hefty fines. 

Recently the homeowner has received correspondence from a collector about the debt, but the letter specifically says that due to the statute of limitations they can't legally enforce a lawsuit.

As just one broad example, if you gloss over this update and a lawsuit related to the property occurs your LLC would be in trouble.

You don't know if a flip you did a year or more before comes back with a lawsuit for some reason. 

Comingling LLC & non-LLC / personal funds is one of the top ways to have a judge disregard / invalidate your LLC in case of a lawsuit (it’s called piercing the veil - google it).

It adds an extra layer between your rental property and your personal assets in the case of a lawsuit.

The true indicator of motivation and ability to sell is if they are in some sort of economic distress (foreclosure, short sale, lawsuits, legal battles (look up how many times that building has had call from the local police), low/no mortgage amount, and retirement. 

I was looking to buy a property with an in-law suite with the intention of living in the in-law suite while renting out the main floor.The current owner has been renting out the in-law suite for years now with no problems, and I know this stuff is extremely common especially in Chicago, however I am in a south suburb of Chicago, so it would be under a different jurisdiction.

Christopher,As an attorney you know the importance of protecting your assets against the risk of a lawsuit.