You may have unpaid water bills and City fines that are not cleared by the case, and are not well defined (yet).You don't own the property, so getting insurance is not going to be conventional. 

To protect both parties, no matter how close your families are, there should be some type of legal agreement to define this partnership and corresponding asset. 

REI is definately the way to go! 

Make sure the LLCis properly defined in your formation of LLCwith the State.

Even if roles and events are defined in your written agreement it won’t cover everything, trust me.PM if that doesn’t make sense and you’d like to hear the nitty gritty of a real world example.Partnering can work great but just be aware you’ll need to do far more meeting and reviewing ahead of time, and in far more detail than you might realize, on who does what, on what will happen and when and why.

You have to define what your time is worth/hour and what opportunities you're missing out because of dealing with X, Y, X of real estate.

I would tweak your numbers a bit (higher budgets for repairs and capex), get more specific numbers where possible, and define what you are looking to get out of a deal.  

But I'm having trouble defining those options.

Your ability to re-invent yourself is what will define your success.In the Chicago market we have been experiencing a slow down in viable whosale deals for about 2 years.  

In addition to moving to the market where you're planning to invest, you have to define/narrow down your investment criteria in terms of the properties; size of the properties, specific geo locations where you'd want/don't want to go; etc...