One thing to note when looking at the individual markets, you can make or loose money in any market.

As she is approaching retirement, she no longer wants to manage this rental property on her own, and we were instead thinking that she could pay off my mortgage, and then I would enter a "rent-to-own" agreement with her.

I once had a property management company charge me $45 to deliver a letter to the tenant advising them that the PM would be entering the residence the following week.That same management company also had an early termination cause in the contract.Now, this may be local to my area, but I soon after received some wisdom from a few other investors.

and the best: it was listed and valued as a 800sqft studio, but is really three individual houses (two 2/1, one 1/1) totalling 2425sqft on 1/4acre - massive equity in there, let me know if you are interested!

Fed allows up to $15k per individual. 

Loans are based almost entirely on the financials of the property not the individual. 

I think it's going to depend on the market, and individual tolerance/desires for return, when you start looking at cap rates and so forth.  

An individual qualifies as a real estate professional for the tax year if -a. more than 50% of the personal services performed by the taxpayer in all trades or businesses during the tax year are performed in real property trades or businesses in which the taxpayer materially participates; The rental or any other activity that you do not materially participate cannot be counted. andb. the taxpayer performs more than 750 hours of service during the tax year in real property trades or businesses in which the taxpayer materially participates., the rental or any other activity that you do not materially participate cannot be counted.

Glad to find like-minded individuals that are willing to make those sacrifices upfront in order to enjoy serious gains in the future!!

My understanding if you owned the home and sold, even if it was given to you, you aren't eligible.https://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.htmlRequirements to qualify for the refundTo qualify for a refund: The purchaser must be at least 18 years old.The purchaser must occupy the home as their principal residence within nine months of the date of transfer.The purchaser cannot have ever owned an eligible home, or an interest in an eligible home, anywhere in the world, at any time.If the purchaser entered into an agreement of purchase and sale before December 14, 2007, the home must be a newly constructed home and the purchaser must be eligible for the Tarion New Home Warranty.If the purchaser has a spouse, the spouse cannot have owned an eligible home, or had any ownership interest in an eligible home, anywhere in the world, while he or she was the purchaser's spouse.