My father and I actually discussed this more in depth last night. Essentially he would be taking equity out of his personal residence to purchase the house (approx 200k) and we would both split the repair costs (approx 50k each). After the repairs are done and I am ready to move in, it would essentially become become a rent-to-own setup. He would have the house appraised after his repairs and then we would sign whatever contracts necessary to have the option to purchase the house for its current market value - 50k (my portion of the repairs) after x number of years.

You bring up some good points about the costs of all of the things I didn't consider (e.g. the pools impact on insurance).

About the in-law suite... It's a little hard to describe how the two houses are set up but i'll try to explain it. The tow houses are next to each other (my fathers on the right, grandparents on the left) between the two homes is my father's driveway the extends about 30 feet past both homes and splits like a T in both directions, the left part of the T is behind my grandfathers house and leads directly to his basement door (this is what my father is worried will be an issue with any new neighbor because my father often blocks the top of the drive way with his work truck which would make that part of the driveway essentially useless for any new owner). My grandparent's house's main driveway is to the left of their house (this is their 'normal' driveway) with a garage and whatnot. You can easily fit 3 cars in their 'normal' driveway which is why having 1 tenet in the in-law suit wouldn't be a problem but having a new family there that wants unlimited access to the back garage via their car would be a problem because they would have to use my father's driveway to do it.