The finish on most engineered flooring is extremely durable and really protects the wood itself.

It is in the best interest of the borrower to protect the lender because that is the well that produces water.

Is there enough protection with that type of contract?

Lending to an LLC usually puts you in the commercial loan side where the rates and terms are terrible.Most states do not honor single-member (only you and a spouse) LLC's and treat them as if they are personal assets anyway so people pay all that money and headache to set them up and they do not even protect your personal assets. 

The benefits to having leverage include tax avoidance, liability protection (tenants tend not to sue leveraged properties since there'd be much less to recover), great ROI due to lower cash invested, etc.  

But I also am old enough and wise enough to want to be sure we are protected with all t's crossed and i's dotted (mainly because this is a rural property with acreage).  

I thought one purchased title insurance to protect against such fees?  

If not maybe look into a home warranty to protect you against that old equipment, but 5% works

@Sonny Pacheco, as a CPA, I am not qualified to speak to matters of asset protection and insurance.  

The best way to protect himself would be to do a double close.