The only thing I'd be concerned about is whatever the sale price is that we agree on, especially with my brother-in-law in the picture (as we would technically be 'buying' him out too).

You may or may not see a dime, but there will be a record of this nonsense for future background checks against these individuals.

Another question; since the money I plan on using to purchase the rental properties isn’t technically out of my pocket but from the profit of the flips, how would that payment work toward the ROI/CoC/CapEx/IRR etc.?

Since it's unsecured and technically is in default, it's top value is 10 cents on the dollar but I doubt you can even get that if you put it up for sale. 

I am sure this will lead to many interesting folks ... can I add that maybe you do  a little background on folks that you allow to do Podcasts.BP is such a strong site that some of the folks that have gotten on BP podcasts if the facts about those folks had came to light you may have chose not to put them on in the first place.. then BP investors end up kind of blindly investing with them because of irrational thought process that HEY they did a pod cast they must be golden.

Security deposit plus move-in fees cannot exceed the amount of the first full month’s rentNon-refundable move-in fees are limited to only tenant screening reports, criminal background checks, credit reports, and cleaning fees.Total non-refundable move-in fees are limited to 10% of the first full month’s rentPayment Plans Required –Landlords must allow an installment plan to pay a security deposit, a pet deposit, move-in fees, and last month’s rent.

I'm sure, with your background, you know more than the average person and area in a great position, plus you've got lots of reliable people to help you out. 

Technically, if you walk away from the deal, all those reports presented to the seller , at least in California, have to be disclosed to the next buyer.

Greetings all,Some quick background...I have read the BP books on how to buy with low/no money down and on rental investing.My future Mother-In-Law has found a house for my fiancee and I to invest in.

Note 1: Technically, you have to be careful managing other peoples property for gain.