However, the property’s cost basis (what they originally paid) carries over to you, meaning if you later sell, you may owe significant capital gains tax on appreciation.Alternatively, selling the property at fair market value eliminates gift tax concerns, but your in-laws may owe capital gains tax on any profit.

There is extra costs, more regulation, and more liability. 

Finally, short-term rentals can offer potential tax advantages, as many expenses associated with the property may be deductible.

What else could that 30, 40, 50k+ downpayment/rehab cost etc do for you if it wasn't tied up in the property? 

Focus on key areas first (like floors, walls, kitchen, or bathroom), which may help you handle the costs more gradually, even if it means moving in furniture or updating fixtures down the line.Also, since the tenant left it in rough shape, be sure to document all the damage (photos, receipts) in case you decide to pursue reimbursement through their security deposit or in court.

"the typical home warranty costs $450 annually, and only 25% of premiums are paid to homeowners.

The cost is the same for a roof on a house that rents for $800 per month is the same as on that rents for $1800. 

Have you started thinking about your strategy or exploring potential markets?

I said that buying off the MLS at full cost, using secondary lenders for the down payment, closing costs and cash out was foolhardy.

It doesn’t cost you anything and gives the tenant time to rearrange their entire life around your decision.