Without knowing the many variables needed to know if this is a good deal, I can tell you right away buying at 80%+ ARV is a bad idea, especially with the issues you mentioned.

My mother in law wants to buy a new house, i own 2 SFRs and would love to possibly partner with my in-laws (we have good relationship lol) with their old house to rent it out, and split the profit. or somehow get this property from them and keep the profits to just me, but i'm looking for a win-win. they are interested in going in on the deal.key issues: In-laws don't want to pay two mortgages.

My mother in law wants to buy a new house, i own 2 SFRs and would love to possibly partner with my in-laws (we have good relationship lol) with their old house to rent it out, and split the profit. or somehow get this property from them and keep the profits to just me, but i'm looking for a win-win. they are interested in going in on the deal.key issues: In-laws don't want to pay two mortgages.

I think the bigger issue is its only 2 bedroom. 

Hey @Mark W Carpenter, just came across this thread... sounds like this may no longer an issue!

1) Is there any zoning issue to check.

FHA loans I have worked on have not had an issue with this. 

An IRA contribution can help mitigate the tax bite but not much.But I get your real issue - you are wanting to eliminate debt not increase the portfolio. 

The more stuff you leave furnished the more calls your going to get when there’s an issue .

We now learned that due to the fact that we live in NY and it not being a community property state, the new LLC will not be considered a disregarded entity, and we will have a vesting issue if we sold as individuals and purchase as an entity other than the individuals who sold.So my question is how can I make this deal happen?