However since there is a law about this, I would think that it would be fair to write in the ad something like XXX law (quote it) does not permit this property to be rented with children under 6 years old as occupants due to the potential for lead exposure. 

We have had great success and Zillow exposure is just as good as if agent listed on MLS. 

LLC #1 cashes out 100K of the equity, while the property is now owned by LLC #2 with a loan.Would this not in essence be a cash-out and refi, with the bonus of the property now being anonymous under the WY LLC holding company?

I'd say your risk exposure here is fairly slim.

You're looking at this from the outside in and seeing a site and its exposure to the liability from tree issues and saying 'If you just spend XXX, it eliminates 95% of the exposure to YYY  claim'.

The only bonus on keeping it is the appreciation.

Then you'll have the cash, a rental and more exposure to Austin which is growing like crazy!

Right now fully occupied but both tenants are month to month. 4/2 is built in basement and 1st floor and also has a bonus living room and washer dryer.

(as sort of a bonus section).

Whatever real or constructed bonuses you can add to the deal will be more incentive and more motivation for them.