The total expense to fix the property was $1850 but I still wanted to give him something.

Mine isn't totally onboard either, yet.

(My usual spiel for this is "It's totally fine, I've been there too, I just need to make sure I have him on the paperwork in case there's an emergency, to protect all of us.") 

Property needs total rehab and was wondering if anybody has experience with total rehabs, what kind of check list do you use, what should I be looking for. 

Needless to say that anyone that had purchased in the last 5 years has done well as long as they were in areas that moved up with appreciating rents and values.Unfortunately, not all of America had done that.I still have a friend of mine that bought in Bristol, CT that have not seen much value or rent appreciation although it had maintained it's consistency.The problem is that he totally missed the boat on the appreciating areas which was where he lived.Unfortunately, investing in non-appreciating areas but living and not owning in the appreciating area is a formula that spelled disaster for him.

But i'd be willing to bet that you'll miss something along the way that will either cost you money, give the seller a leg-up on negotiations, or cost you the deal.   

.#5 Make Decisions Based on the NumbersYour real estate investing strategy should include the financial parameters by which you determine if a property is worth purchasing.Your strategy may include details about: Purchase price range.Investment cash needed for repairs and upgrades before leasing to tenants.Financing strategy for the short and long terms.Bargain purchase (the percent under fair market value a property must be purchased).Immediate value increase (the percent in increased value you expect after making initial repairs and upgrades).Geographic area.Net income.Cash flow.Net cap rate (annual net income/total value).When you find a potential investment property that fits within the guidelines of your real estate investment strategy, you can pull the trigger based on the numbers rather than emotions and personal preferences.#6 Don’t Buy from Unmotivated SellersMotivated sellers are usually willing to work with buyers, so focusing on finding motivated sellers can result in making great deals as a real estate investor.

A processing fee to equal to the total fine (including fees, penalties and any other charges) will also be taken out to compensate the landlord for handling.6.

Would it be possible for my in-law to sell 500k of the house to my spouse and I, use that 500k to buy herself a new cheaper house to move into, and then we all sell the original house together 2 years later for a total of 1m tax exemption?

With a home equity loan you can borrow against that difference, some banks allow up to total of 100% of homes value but typically best rates are 80% and below.