Buying Mother-in-Law's house??

[Frank McSorley]

My wife and I are considering buying my Mother-in-Law's 3 family house in MA. She's retired and no longer needs the tax advantage of home ownership. My wife and I make around $120,000 and have been getting killed on taxes the last few years with an empty nest and no deductions.
Basically what we'd be doing is an early inheritance. The house is worth around $650,000. My Mother-in-Law still has a mortgage from when she bought out her sister several years ago for around $100,000. We would take out a Mortgage for around $400,000 to pay off my wive's brother (his share of the inheritance) and pay off exisisting mortgage. My Mother-in-Law currently lives on the 1st floor, my wife and I live on the 2nd floor and we rent out the 3rd floor. Are there any downside or hidden traps to this plan?