Your local laws are going to prevail.

If I were in your and/or your mother-in-laws shoes, I would go to a local bank and use the free and clear house to secure a $150K+ line of credit. 

We're working with a mortgage broker local to us and he has put us in contact with Lendbase as well.

I will be doing my own research on local laws & regulations, but want to do this 100% by the books.

Any groups/meetups that i could attend in the local Houston area?

Does your local jurisdiction require you to return those fees if they were not screened? 

Hey gang - A partner and I just started a local RE investor meetup.Q: For anyone that attends these regularly or runs one....what are some of your best practices/tips/tricks to keep your audience engaged and growing?

A friend of mine and I went to meet him at a local golf course and then we talked more about the opportunity over lunch.

No, you cannot create phantom losses this way.Some additional issues that we have not addressed:- holding rentals inside an S-corp has many tax disadvantages- you will likely jeopardize your $250k/$500k capital gain exclusion for homesteads- you will lose asset protection afforded to personal residences by most states- you will lose your homestead exemption for local property tax - your insurance will have to change from owner-occupied to rental, i.e. go up- and there's moreConclusion: there're reasons why nobody is doing this clever "strategy" but A+ for trying.

Find a local one.