I mean, I know there are only so many hours in the day, but it would be awful do jump in 'with only a floatie' and have your first (or second) deal go bad....And they do go south all the time, we all have had that happen.....

This works because, for short-term rentals, the IRS rules allow income to be treated as non-passive if certain conditions are met, such as offering substantial services and meeting material participation tests.

Is it a good or bad idea to re-fi that quickly?  

I would RUN from this 'Contractor', his attitude is bad and you will have other issues with him I would bet...

.) - So we ended up foreclosing, but the borrower contested it (BAD MOVE by them).

There are all kinds of potential bad outcomes of this for sellers.Most businesses and consumers should be striving for efficiency and transparency. 

I do not think that's a bad idea at all.

How can I tell if my experience with repairs and tenants was bad luck?

The market is definitely going down, but that's not necessarily a bad thing. 

If the plan is for them to live in the house until they are no longer able (either they pass away or move to a nursing home), then it may be that you and your husband are paying for all of the repairs and things like replacing the roof...or maybe they will treat it as their own home and simply give you the money each month to cover all of the expenses.I'd be concerned if he has siblings to make it clear that the house is yours (though with the in-laws paying for everything the siblings may see it differently) and what happens if you divorce?