He had a criminal record a mile long.

I once found a web site that showed police/criminal activity per type of offense in just about every city in the US.

A criminal offense?! 

A: In a statement issued by the Housing Authority of Cook County in connection with the consideration by the Cook County Board of whether to prohibit discrimination based upon a prospective tenant participating in a housing choice voucher program the Housing Authority of Cook County stated as follows: “Owners still have the ability to screen all applicants for suitability for tenancy, applying their screening criteria – criminal background checks, credit checks, home visits, landlord references, etc. – equitably amongst all applicants.

So, the way to be more like them and obtain tax code benefits is to use the tax code the way it was intended.Also, if you're using LLCs outside of a business entity structure, you're doing it wrong and you will leave yourself open to being considered as having disregarded "the corporate veil" which will leave you open to attack from shysters and thieves ... er, prosecuting attorneys and plaintiffs.Your tax accountant and tax attorney can provide guidance on this, @Ralph E.

I've still had some with criminal records applying (and being declined), but they can't say they weren't made aware ...

you do not need one but you certainly want to use some sources that I believe that they have on this site which are a source to check on credit, criminal records and always check resources provided. 

Ultimately if a criminal is going to break in when you aren't there, there is a limit to what you can do.

History and social opinion of neighborhoods, often a poor property may not pop up on criminal statistics, poor school ratings or districts, or other data.

So, with your subordinate interest you may have placed a tenant in a property keeping another lien holder from securing their collateral, doing so intentionally, to profit.....it's starting to have an odor about it now, I can see some prosecuter looking up things like lien fraud, bank fraud, establishing false liens and on and on to impeading operations of a federally insured depository....I don't know, just sounds like things they might try to stick you with if for no other reason acting unethically toward other creditors.I'm not sure why so many people think that all one has to do is give others notices and disclosures about what they are doing an it absolves them of ethical responsibility or shields them from violations of law, just not so.....in many cases.Interesting thought of taking possession of a property with a very limited interest in it, passing it off allowing others to live in it, blocking other creditors from taking possession for awhile and betting on when the tenant will have to leave.....interesting that someone would think of it....lol...