The seller states he wouldn’t look at anything below 475k According to BP calculators i can make a profit of 28k if I buy it at 480k which is basically my entire year’s which is what i am paying in the rent in the same bldg.

The kitchen and baths should be updated but every incremental dollar you spend over what is needed to get the property sold comes from your profit.     

I don't know what kind of deal she will come back with ($ wise), but does anyone have any advice on profit sharing, how to structure the deal, whether both of us should have an LLC set up, how money is spent, etc? 

One thing I'm not sure of is location in this case, I suppose I could either look in a well established area and expect equity to increase through remodeling or in a less desirable area that I'm gambling will attract more attention in the future.

If, however, you are buying it with cash and without an inspection, you could tell the seller that you can close in a few days, which might let you negotiate for a lower purchase price.In the scenario where there is a loan with interest, and the interest is all your father-in-law receives (he isn't getting any of the profit after the sale), then he is indeed a true lender and this is a true loan/mortgage.

You might have to give part of your profit to a Partner but part of something is better than nothing. 

I plan to do this by reinvesting my profits into more properties and living off of our W2 paychecks.

At most you have $40k profit -long term capital gains at approx 20% tax is $8k - most likely worst case tax. 

Then go from there and use the flipping calculator to figure out how much you can offer and still make a profit.

., plus a satisfactory profit, then go for it