Would you recommend opening an LLC as the first step ?

Your client (the Sponsor) is also required to take reasonable steps to verify that investors are in fact accredited.

What would you recommend for the first step for us to take?

It'll walk you through the steps of what you need to do for your state.

In reality, they are just one step below thugs.

One step at a time.

The heirs get the property with a stepped-up basis avoiding having to pay the IRS/States any tax on sale. 

Do you know how to analyze deals to know if a deal even makes sense to pursue?

If you want to pursue this, I would suggest that you hire an attorney to discuss. 

General Liability – This covers you against claims of Bodily injury and Property damage.Bodily injury – This is the most common coverage everyone is concerned about and rightfully so.These are the most common types of claims.It can be anything from a tenant triping on a step, falling from a balcony, a guest or passerby slipping/falling on the sidewalk.Property Damage – Example, your building starts on fire, and causes damage to your neighbor.Your ceiling comes down on tenants property.