Not sure a life estate adequately accomplishes the intended outcome, anyway.My instinct is that I would keep the inherited house as a rental property, either after my step-dad passes away or chooses to move out; or, by renting it out to my step-dad for the rest of his life and, after his death, to other tenants. 

What was the outcome?

We purchased it below market value and increased the rents from $1000-1200 up to $1400-1500 What was the outcome?

Replacing pretty much everything... new roof, kitchen, bath, AC and flooring What was the outcome?

What was the outcome?

I am not sure about your outcome but, it is worth a try or rent it out to another tenant many people need housing. 

Thanks for reading my long winded post, I realize with situations like these there are no "correct" decisions only different decisions that yield different outcomes.

What was the outcome?

What was the outcome?

In short, I've invested by a variety methods and each time it was directed by a different goal outcome.