Advice Needed on an Opportunity

[Haven M.]

My wife and I currently live in a duplex owned by my wife's grandmother. She is in her 80s with a small fixed income and a dwindling nest egg. 

There is decent equity in the house: $125k or so on the mortgage and current assessment around $420K. She no longer wants to be responsible for paying the mortgage and doesn't want to live on an equity LOC.

She doesn't want to sell and downsize because she doesn't want to live alone or in a retirement type community, and would like to live out her life here. She's considering selling me and my wife the house on the condition that she continue to live here. 

I think it's a great opportunity for us, but I am looking for ideas on how best to go about the purchase. I would like to parlay this into a situation where we can take care of the grandmother and leverage the equity for investment in other income property.