Suppose a guest, or worse - a child, were to make their way out to that second floor balcony and fall through the railing that you knew was faulty and get seriously injured. 

I have a 2-bedroom being rented by a single mother with only 1 child.

Is it like having a child, you're never ready, just have to jump in?  

For me my parents owned real estate and as a child I saw a lot of what not to do.

In MA, you cannot rent to a family with a child under 7 unless you have the unit deleaded and have a lead certificate on file with the state.

according to Bank of America study:75% child's education is important64% education is extremely important53%would buy in specific area for better schools25% would move during school breaks, think summer vacationhttp://newsroom.bankofamerica.com/files/press_kit/additional/2016_Bank_of_America_Homebuyer_Insights_Report_Infographic_-_Moving_with_Purpose.pdf

Leveraging the money I could easily make returns higher than the delta but there are also giant downfalls to the asset based loans like high fees, prepayment penalties, my first born child, etc, etc.

Here’s my question: I’d be putting about 8k into repairs and such, if it were you, would you just treat it as a mother in law apartment as if renting it to my child or mother or claim everything as if it were a full rental?

Since I was a child that's what I have wanted, I hate the idea of working to make someone else wealthy.

You are able to purchase the property under your personal name retaining the favorable financing options, then transfer the property into a Land Trust  (which is excluded from the Due on Sale Clause since it is considered an Inter Vivos Trust and protected via the St Germain Act) and assign the beneficiary as the LLC to hold onto the liability protection.The other issue you will run into in California is the additional franchise fees, minimally starting at an annual $800 per LLC [and per child series.]