Your friend is going to just hand over $38k in equity? 

This pandemic underscores the need to fix these structural inequities.

Is $1.3 million in equity all the down payment in your rentals + your rehab costs or the current market value?

The day I buy, I have build in equity.

In the last year and a half, counting the 4plex I'm in contract now, I will have acquired about: (my share, including in undivided interests) $800K in RE assets >$100K in gross rents (annual) ~$20K in tax-free CF (annual) 6,000 sq ft of income property in Bay This means that every $10/sq ft increase in price is a $60K gain in equity. $10/ft isn't a lot of money in the Bay.

We have two homes with about $1.5M in equity each, one we live in and one we rent.

A court in equity will likely factor the cost of material into the mix but I doubt labor will be allowed.  

So the question pertains to protecting the $100k-$200k of equity in the entity.If I understand this right; if an owner has over $100,000 in equity, is there a way to protect that equity other than a LLC?

In any case you have built in equity and a risk buffer if you would ever sell.

The best buy and hold here is still buying fixers well below market, cleaning then up to "make ready", refi at low rate and have a built-in equity and lower loan balance.