Some Much Needed Advice...

Okay, I am in a little predicament, and I would greatly appreciate anyone's thoughts, insights, or advice on this matter. Here it goes...

My soon to be wife's parents own free her (my soon to be wife's) grandmothers house. It is a small 900 sq. ft. house that is in fairly poor condition. It desperately needs new roof framing along with new shingles and such. Along with that it needs updated electric, paint, flooring throughout, and a new tub (her grandmother needed a handicapped tub which unfortunately takes up the whole bathroom). My predicament is that they (her parents) are willing to sell us the house after the remodeling is done, fairly cheaply. But the major predicament is that they would like to keep the house in the family. Which would mean that we (my soon to be wife and I) would not be able to capture any of the equity in the house to place into another house or investment. I do not think it would be appropriate to sell the house back to them (her parents) for FMV if they sold it to us for less. I also do not want to be sneaky about it either. I would like everything out in the open to prevent possible problems.

Here are the numbers to the house...

Comps place similar houses at about $28 - $30,000
* I believe that after all the repairs and remodeling, it would be about $30 - $35,000
Current mortgage on the property is $0
Taxes About $1000 / year

Any advice would be greatly appreciated.
Attached is a basic floor plan of what it is currently like, and what I believe it should look like after repairs.




Again please give any thoughts or ideas.