Having been recently threatened w/ a (admittedly frivolous) lawsuit, I sleep better at night knowing this nest-egg is judgment-proof.My passive income is probably lighter than yours, as I've consciously invested primarily in value and hybrid, as opposed to yield, plays.    

That's evidence of possible embezzlement by the board or management, lawsuits, poor management, ineffective boards, or other greater underlying problems.

Meaning that they will decide if they are going to fight or settle a lawsuit.

This will help to mitigate legal risks and lawsuits, which can potentially destroy your investments.

* What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for owner lawsuits* How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?

instead of heating the situation up by firing the PM and threatening the tenants with a lawsuit to get their act together, I think both parties would be more receptive to helping you out.

If you are dead set on that I would suggest one of two things, build from the ground up or be open to it either taking time for inventory to become available or that it may look different like an in-law suite or two houses on one lot. 

We own the home jointly, with the mortgage owner being an H1B holder.Since we want to rent out the house would like to create an LLC to protect us and our assent from any lawsuits in the future.

@Maximo DejesusYou must comply with Dodd frank when dealing with this type of loan and may also be required to be licensedYou cannot get them to deed property in advance if they do not make paymentsDoing stuff like this while thinking you are helping them just opens yourself up to a lawsuit if it goes bad.

If you fail to follow the rules, you may open your personal assets to a lawsuit.