From research I found out that foreclosure process on trusts is different and I will be avoiding dealing with them early on into this journey.I would love to get feedback / comments on the nuances of scenarios that I've described. 

Also, I had an agent one time give me a list with items and costs from a rehab she was involved with that she described as a "gut rehab". 

Joe's not wrong . . . the simplest path will be what I described, and Occam favors this for sure.A different path that may well lead to a more dynamic overall success would be to get up into the clouds and figure out what fuels you and what your big "why" is in life and then figure out what dirt work you can do to best pursue that. 

From what you describe, your brother in law committed mortgage fraud.

If you have not yet replaced the property, you state on this form that you are reporting a delayed 1033 Exchange and describe your intent to replace it with a "like kind" property within 2 years."

You described a perfect rental property -- good schools with two rentals for the price of one (or just above). 

If more, you should capitalize.If you forgo the DMSH and instead apply the BAR tests, what you're describing would almost certainly be betterments and therefore an improvements (read: capitalized). 

We know most of investor in the same situation as described below.

Apart from that one thing, from what you've described, it sounds like a lovely home!

Buy it and rent one unit back to him or something, but with the scenario you described it just sounds like he is trying to get someone to fix his house up and add value for him.