“Gifted” Property in Seattle

[Gabriel Mortensen]

New to real estate investing through unexpected scenario.  Looking for guidance on how I should approach this from my specific situation.  Here is the current situation.  

1. Father in law has a home in Seattle worth about 600K(After Repair Value) with 100K left on the mortgage and wants to gift it to me and his daughter.  

2. The home is vacant now and just completed demoing the inside as it was un livable.  Will be complete with Reno in about 2 months and plan to rent it out to cover current mortgage and save for more investments. 

3. We want to leverage this house to continue investing in real estate (Buy and hold).  

4. I have the capital to pay off the mortgage and transfer in our names through quit claim deed if needed.  

5. Father in law purchased the home for 120K 15 years ago.  

We would love to use this home to invest further in real estate by leveraging the equity in the home.  After doing research on forums and internet I am leaning towards the following path. Quit claim deed of the property, wait 6 months and refinance and have father in law removed.  I understand that we would then inherent the cost basis of 120K and would have to pay taxes on profit if sold.  We are not planning to sell though and instead want to leverage the equity in the home to purchase another rental.  My understanding is in order to do that the property would need to be in my name.  Am I on the correct path?  Is there something I am not thinking about that could cause issues for myself or father in law with taxes or any other areas of concern?

Thanks for the advice,

Gabe