As long as they look good, don't look a gift horse in the mouth!

He is gifting me $225k.

See the below analysis;PP - 210k, DP - 42k, CC - $2500, Apprailsal - $500, Rehab - 15k, ARV - 250k Rent UP - $1250, Rent Down - $850, Garage - $300 (blended for 6mth lease) = $28800 - $2500 (2 months for loss of upstairs reno)  = $26300/yearExpenses - VAC - $170, Util - $220, Ins - $200, Prop Tx - $150, Repair - $200, Tenant Gifts - $25 = $11580/year + Mortgage ($706.61/mth) $8480/year = 20020CF              = $6280PA (3%)     = $7500PR              = $3520AA                = $25000Total            = $42300 ROI = $42300/$60000 = 71%Were hoping to have a $1250 upstairs rent for the new tenant and have them pay 60% of the utilities.

I actually want to offer $100k on the duplex and asked for the $7500 to be a gift in equity to do minor repairs.  

That way if all three units are rented out at the same time, I would be able to completely collect from the third unit during the given time frame, almost like an added bonus gift. 

A cash gift?

If you really want to see the inside then offer the tenants a $25 gift card to a local lunch spot and ask them to go to lunch on you this Saturday while you do your inspections.

Neighboring lots have recently sold for $1.2 million & most of the waterfront homes are worth $2-3 million (a few of the larger ones are close to $5 m ).Since it was a gift I'll have to pay capital gains if I sell it, so I'm considering different options.  

We'd 'gift' her the house or set it up in a trust.

But it appears you have no money since you say you "have 35k to invest" but the funds you list are all from borrowed sources that would not be in an accepted list unless your family can gift you the funds.