Do I need to verify her custody of these children if they are on the lease???

I would suggest that, for custodial accounts, people check with their administrator and see if they have in-house capacity or a firm they recommend.  

I saved up a lot of money to buy my first house, but had to use all the money I saved to pay off an attorney so I could have custody of my son! 

Upon further reflection, probably worth a quick discussion with divorce attorneys as well - this may effect who claims children on taxes if there isn't already an every other year/shared-joint custody plan in place as well as child support if that applies- I would feel better verifying there weren't changes to be made here that came up in time (maybe you've already talked about it) or, if there were changes to be made I would want them outlined ahead of time to avoid going back to court if possible and drama ensuing. 

If a tenant says they don't have kids, but then they get custody of their child, you now have to put the tenants up in a hotel and delead.

I like it for 3 main reasons:Passive (just be sure to do your due diligence upfront)Low risk, I usually lend at around 60% CLTV (I've done both 1st and 2nd position notes)Nice return (most of my notes were over 10%)Many of those required quick funding so you may find having a custodial on the middle being a challenge, consider Checkbook IRA. 

By my quick calculations, including the mortgage payments, you would be looking at about $1200/month negative cash flow.You have almost $300k in equity trapped, to be released in your custody once sold.There's no question this is a sale.

You have no knowledge of the legal situation (who has custody, etc) and you are not actively assisting.

Mine are owned by an LLC whose only member is my IRA custodial account (a checkbook IRA).

It will likely need to be set up as a custodial Roth IRA at first, but then will convert to your son when he turns 18 or 21 (depending on the state).Your son can put up to $6,000 per year in the Roth.