They earned the income in DE, so it is DE source income. They have to file a DE return. There is no minimum filing requirement for non residents
https://revenuefiles.delaware.gov/2018/TY18_booklet_res.pdf
they do not need to file an MD return https://support.taxslayer.com/hc/en-us/articles/360015706552-What-are-Maryland-s-Filing-Requirements...
Minor children are only exempt from FICA, if the business issues them a W-2. You cannot pay them "under the table" or issue a 1099-Misc.
There is some question as to whether a rental qualifies as a business, for this purpose.
