We split everything 50/50 with no prior operating agreement, LLC, or paperwork.

There are four of us that have got together and formed an LLC.

The loophole my Seller cited for trying to back out was that his "business partner" was a 50/50 member of the LLC who owned the property and that his partner had verbally committed, then changed their mind.

(Insert standard California refrain: "It's too expensive here")I was planning to form an out of state LLC to avoid California's annual $800 LLC fee.However, California law requires that if an out-of-state LLC is managed from within California, it still has to pay the $800 annual fee!

Would I create an LLC for the property with an operating agreement?

@Brian GerlachMarriage is just the loop hole.If you're on title with anyone, a partner, your lovely bride, your brother or your cousin that can fix things AND THAT PROPERTY IS FINANCED, it counts against your 10 conventional limit because that property is encumbered and you own it.Now, if that property doesn't show up on your taxes because your partner claims it or if that property is owned in an LLC and is encumbered by a commercial loan, that's a different story. 

This llc is also holding our longterm rentals. 2.

@Geoffrey Bissen  It is always best practice to put each property in an LLC.

The other thing to consider is how many properties you have under the one llc. 

Here's the idea.My brother & I create an LLC with the members being our IRAs.