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I would sale the California property and apply that to the new TX home and save the rest for R/E Investing.

Welcome to BP @Charles R.!

In general, the more money you put into the deal (down payment, rehab costs, etc) the lower your CoC is going to be - unless you do a refinance using the BRRRR method. 

What part of town r u in? 

As things are occurring now, the bank is being paid, so they have no interest in property seizure or foreclosure, as it is a performing note, so the FIL currently has the opportunity to conduct control of it in the same way a normal person would, which should allow him to pass this via normal methods (living trust for example) to heirs, provided the payments on the note have no interruption.Am I off on any of that?

@Gary R Uren, the more important issue is "On what tax return were the activities of the property reported?"   

The other method is where the sponsor calls for all of the capital at once, and the capital sits idle with the sponsor until acquisitions are made.  

My advice to you would be to learn the various methods of real estate investing such as wholesaling, flipping, buy and hold, tax liens, etc. and also learn your area to see what has been successful there. 

If you don't already have a Historic restoration Contractor lined  up, I hear the James R.