Check your local laws to make sure you don’t need a license anyways to broker real estate.  

Isn't there some law where if he doesn't pay tax on the 1099 it would become my liability?

Hello Carolyn,If you want to risk the opportunity of having a fair housing law suit I would move pass asking for any additional deposit on the property.

Wouldn’t it be beneficial to move out from your in laws first before investing ?

We're frequent visitors to the Bay Area (dad went to Berkeley, sister/brother-in-law work in Silicon Valley) and know the area. 

Does anyone have any info on how can a  2nd lien against a property be removed when it got discharged in a bankruptcy chapter 7 when strip offs were permitted by bankruptcy law and discharege says assignemnt of mortgage/lien shall be deemed void and extinguished because property value was underwater and was zero?

If the current owner is being strict on that, or there is a tenant in place, then yes, you will need to plan 1 or more "open house" type showings.

There are very strict rules for property management which obviously your broker did not follow.

Please check with your state's laws if this is the case.You may want to have an attorney do the following thingsReview the Purchase/sale agreementCreate/review the lease agreementCreate/review the partnership agreement(if you decide to partner up)evict a tenant2.

Whether you think you do or not you have a termination clause it is what is in your lease or the landlord tenant laws of the state.