I want to ask her to purchase but I do not know how to go about doing so and structuring it so that we both benefit from the deal, any ideas?? 

@Sean Oh If it is an illegal ADU for an original permitted structure (i.e an original detached garage) the process for getting it legal is doable.

This does not appear to be a good deal for a buyer who has the ability to qualify for conventional loan terms.The seller has structured a deal that allows them to net more money through a combo of factors, including the price, the above-market rate, and the loan terms.

WE ARE NOT ACCOUNTANTS, so any discussion about our tax strategy on this one is based on guidance that we have received for ourselves – we strongly suggest that if you are interested in understanding these strategies that you consult with an accountant.Issues: we did not understand the financing structure for this transaction, our purchase price was $60,000 and our lender agreed to finance 100% of our renovation, but in order to do so they increased the amount of cash we had to put into the deal from $30,000 to $44,000… Normally this would not be a problem BUT since we purchased 44 Blanchard St. all cash, we definitely felt cash flow pressure.

As for the termites, I'd factor in a tenting, and replacing the siding and trim, it seems unlikely they ate enough to significantly damage the structure but a termite report would tell you that, which if that is the reason they fell out, they may already have a copy of or at least knowledge of.

We spent $20,000, or 20% of purchase price on termite fumigation of all structures, re-wiring the main house and replacing the old AC panel, exterior painting, replacing all the old windows, and putting in new central A/C in the main house.  

If I did utilize these people to invest what's your recommended approach to structuring something like that.

Now, keep in mind that grade around the structure may have changed since then. 

I'd love to talk with someone who has scaled up like this about how you structured/collateralized your loans when using OPM.It seems like it would be difficult to use private money long term with hard money loans, because it would be cumbersome and difficult to keep the money deployed constantly, running the risk of paying for capital without having it lent out.Thanks in advance for any input.

If you delead, and maintain the standard, you will be in the clear.Here's the law (emphasis added by me):460.100: Duty of Owner(s) of Residential Premises (B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).