Too many things can go wrong when you know what you are doing and in your case you can multiply that 10 times since your experience level is very low.

I am forming a team/business partner to start on real estate investing, and I want to ask if we need to get some kind of formal business licence such as an LLC...or we can just do it in personal/individual level? 

Maybe they trust title companies more than attorneys.You would think that the new lender would be satisfied that there is a closing and wiring information was sent to the old lender showing that the loan is getting paid off.It sounds like you just need to wait out the time.

I have noticed that the foreclosures have dipped to the lowest level in quite some time, at least in the Texas major cities of San Antonio, Austin, Dallas/Fort Worth and Houston.

If you have a unique question or scenario, or you have something that requires and salty REI's input then this type of forum is great for that.At this point, without knowing more about your level of experience, you appear best suited to find a mentor or partner who has a year or two of experience, you want a mentor that is not too far ahead of you in the endeavor.

First I would talk to an attorney about a living trust.

If you can have someone from your "team" there that you trust, I would go that route.  

Put a level in the middle of the gable end walls. 

In saying that, depending on your level if knowledge, option 1 is probably a better one. because $3000 is not enough of a buffer to service the property if you need to repair things.

It may take some searching, it is likely to be a few levels deep.