My understanding is primary residence are allowed to built ADU (Popularly known as In Laws unit).

His sister in law is my REI realtor, his dad was my dads partner in multiple REI deals and is my commercial broker.

You need a good source for local landlord tenant laws, a  reserve account for the unexpected, setup a payment tracking system, find a handyman, set expectations with your tenant about what constitutes a valid emergency, have the tenants sign a "walk through" list with photos of the condition of the house, make sure they have renter's insurance, 

Luckily we have been in the industry from it’s conception and have followed the constantly evolving law changes in state and aperitif counties.

I remember plenty of railroad track embankments that were up for sale (railroads were exempt from abandonment/sales by law, but the slopes of the land on either side weren't and they always popped up - of course completely useless as an example). 

Check your local laws.

This could vary somewhat even within my state because the law does allow them to reassess more often.

Also, yes its perfectly within the guidelines of the laws.   

Is this violating any sort of securities laws?

Beyond that the reasons for that law are important.