The house next door just became vacant and she is asking about having her parents move in next door. they are on disability and have sufficient income to get in. my question is, has anyone had luck renting out to family members of tenants?

With the corporate guarantee get the parent company and not a subsidiary on the lease. 

My parents just moved to Redlands a year ago so I'm out there all the time visiting.

Are these millennial living with there parents?

Recently my wife and I purchased her parents home and leased it back to them.

Borrow them, babysit (earn $), foster parent (earn $).

#ThatsOaklandA landlord can evict a tenant for the following reasons: Failure to pay rent;Breach of lease terms;Failure to sign a lease extension or renewal that contains materially the same terms as the current lease terms;Willful substantial damage to the unit;Disorderly destruction of peace and quiet of other tenants;Use of unit for illegal purpose;Denial of legal access to unit to the landlord, after written notice to cease;Owner seeks in good faith to recover possession of the rental unit for her occupancy as a principal residence, where she has previously occupied the unit as her principal residence and has the right to recover possession for her occupancy as a principal residence under a written rental agreement with the current tenants.Owner seeks in good faith to recover possession for her own use and occupancy as her principal residence, or for the use and occupancy as a principal residence for her spouse, domestic partner, child, parent, or grandparent.Necessary substantial repairs, for a three month temporary relocation; orOwner seeks to remove the property from the rental market as an Ellic Act eviction.

These are things you need to factor into your purchase price.One thing to combat @Jeremy Hart point about tenants failing out or stopping payments is to require a parent as a cosignatory.  

If anyone has any insight fell free to pitch in.Long story short,Clients parents got reverse mortgage from Freedom Financial, both now deceased.After both parents passed away heirs to the estate signed the deed back to Freedom Financial.

I am getting two houses from my parents.