Worst case scenario you have to offer a small rent concession, but now you know where the market is.

He works with us often here in Chicago, but can service loans across the country!

My plan is to buy the house subject to their existing mortgage, renovate the property, refinance it and pay off their remaining loan balance using the money from the cash out refinance.

Also seems like a lot of MF sells occupied with tenants in place so you just have to comfortable with that and contracting up from and seeing inside after contracting.    1st step is to find a great lender and get pre-approved for a loan so you know what your budget is. 

I'm with a third-party Property Management all over Houston managing a little over 300 Single-family or Small Multi-unit rentals!!

Us: We want to buy the property, fix up the (3) apartments not occupied by her parents to generate rental income.QuestionsMy thoughts are to work out a deal where we purchase the property from her parents without taking a loan from bank.

Consider purchasing a duplex or small multifamily for your next home.

Quote from @Erik Estrada: There are a very small pool of lenders okay with a PadSplit.

The small daily fee you will pay for social posts of your airbnb (doesn't have to be direct booking site) will pay off in one booking.

Meeting a 20% down payment to avoid PMI seems manageable, although would take a big chunk of my liquid net worth, and I prefer this route over using an FHA loan.