Most investors still want to invest in the city because of the relatively low tax rates. 

If she is going to live out her days there, it is "tax wise" better for you to inherit the property than for her to change ownership to you while living (it's a thing called a "stepped up basis" (look it up).

If you turn it in to a rental you’re giving up the tax free gain.

Both Rogers Park and West Ridge will be great long term stable options but the Northside of Chicago has really become more of a appreciation market over cashflow just because of the limited supply of properties and the aggressive property tax increases occurring due to the Assessor revaluing northside properties.

I can't tell you how many new clients have come to me that lost thousands in tax savings because they didn't talk to a REI tax specialist. 

This all gets turned over to our CPA for tax prep.

@Orhi Tahi I’m happy to help you run actual numbers if interested (property taxes, estimated rents, etc).

We heard that there is a way to rollover this money into the downpayment without withdrawing the money directly and it being taxed as an income for my grandmother.

I've been part of deals where the investor was in and our of an out of state investment in 90 days and netted 45k after taxes. 

I was fist trying to qualify for a conventional but since I can’t verify some of my income and my tax returns are a bit of a mess, I’m going down the DSCR loan path.