At that time we could renovate the ground floor apartment and potentially turn it into (2) apartments for a total of (5).My questions come down to how do we deal with the existing 40k mortgage, whether we can make it work so her parents aren't paying much in rent, if anything at all, and whether or not we set up any legal entity, like a trust to help the legal situation of paying off her sister down the road. 

Make sure you have roles and responsibilities set up.

Or can you still run everything through your personal return (just want to make sure that I can deduct things such as HOA fees which I can do if it is a rental).2) If I do decide to run everything thru my personal tax return (save on LLC fees), should I at the least set up a separate bank account to track costs separately?

We now are looking to create an LLC and setup the necessary legal documents to protect both parties and layout the terms of the agreement.

Text me to set up a chat!

It's easy to set up and use.

A CPA familiar with local STR regulations can definitely help make sure you’re set up correctly!

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I am here to create a business strategy that protects personal and business investments and mitigates risk,  procure a coach or mentor, and set up tax strategies to create long-term wealth for myself and my family. 

The set up is the easy part, it's just figuring out what you both like/enjoy.