Also, if you have family members involved, I would start looking at the larger apartment complexes where everyone would get more bang for their buck.

With appreciation, you won’t be able to pull your money out for a few years at least even if you bet correctly on the market.

My sibling owns a separate business that I am not involved in.

With out all the competition in the metro area, Absentee Owners could be a pretty good bet since you won't run into as many investors mailing to them. 

I don't really have any experience with real estate investing, though I really want to get involved.  

That involved updating the kitchen with new cabinets, flooring, sink, appliances, made the living room / kitchen an open plan.

I'd be a little more worried about the 2.7x rent.  3-3.5x rent is the safer bet.  4 dependents on one salary is also a big red flag. 

If you didn't over-pay for the house and he didn't charge you closing fees I'd just adhere to w.e he says....Your best bet is to post on Avvo and see what the lawyers say (its free).

I bet the big ones go every month.

Yes, the involvement of your daughter is disturbing and totally not OK, I would tell the Mother (owner) that this behavior is unacceptable and if she is not sympathetic then don't worry about burning that bridge, it wasn't worth crossing.