If someone injures themselves and sues, they will be suing the LLC and not you personally.

Of the two options you mentioned, I personally love house hacking.

Until you work out the bugs in your sysyems and procedures.Or, if you invest farther away, do a personal, physical (not Zoom) walkthrough of the property before you sign off on it.Surprises and out of state investments, don't make good bed fellows. 

Have LLC 1 provide the funds for thepurchase and provide a mortgage to LLC 2.2.

Make sure you have the funds to complete each portion of the renovation.

Personally, I find my deals on the MLS (in CO, IN & FL).

It depends on what part of your life you are in.Are you still aggressive when it comes to increasing your passive income to help fund your lifestyle / retirement?

I've done similar things with adding or remodeling while house hacking and needing funding to do so.

Don't stop asking until you find the right person for your situation.

This is considered a personal home - even though it has rental income, so you only have to have 3.5% down frequently, not the 20% down it takes to buy a true investment property.