Assuming your not doing your own servicing then the majority of states you do not need to be licensed in but you need to register your company as a foreign entity.NMLS is probably the best site to research it but if you let people know what states your interested in then ask around.

@Brynn Hatch welcome to the site.

With that said, just wanted to say thanks to the BP site and members for all of the encouragement and support consistently displayed throughout the community.

Will that complicate the transaction?

What I was hoping was to slow things down, but this actually ends up being a pretty complicated scenario. 

Am I just complicating the analysis by looking at it this way?

They won't be amle to make their lot smaller than what is required for what they have on the site.

You will learn tons on this site and even more from the members.

LLC's can also be expensive and complicated for a number of reasons.

I have seen on this website answers both ways regarding this (the site administrator saying leave it in Sch A, and his colleague (also a enrolled agent) advising that it can be written off in Sch E, but that there are certain restrictions mainly -- you must have passive activity gains where the deductions are covered (no passive activity loss carry over allowed.