Luckily, my wife and would be in a position to buy their house from them at fair market value, if that is the best option? 

Seeing words in that language like might, try and "not at all" would concern me if I were reviewing their fund for investment!

Because you are not changing the tax return that reports the activity of the property.But... the IRS holds the position that Husband/wife LLCs can only be disregarded in community property states. 

I have been reading mixed reviews.

Here’s my honest advise; consider studying for and obtaining your real estate sales license, and obtain a part time position with a real estate agency that will provide training, guidance, and oversight.  

You can also search Google and read reviews.

I'm the single breadwinner for my family (2 kids) so I don't know if I'd have the time and energy to both run this rental and manage my work so I can reach the income level to handle the bigger mortgage comfortably.I feel like this chance for us to have a rental property with positive cash flow won't come often so I really want to explore it.

I have been able to review or been told of several audits (from other REI tax colleagues) related to cost segs in the last year or so- and of those none of DIY cost segs were allowed under audit. 

@Surya S KumaresanYou're in a great position to grow your real estate portfolio in Atlanta, a market with strong appreciation and rental demand.

I'm looking to purchase my first rental property and have been searching for a deal that would generate positive cash flow based on my projections.