If the property can service the debt at 90% leverage between a senior 1st and the seller second, you're looking at a good investment!

This is what happens when owners go with the cheapest PMC services they find, yet have no clue how the services actually work.- The new PMC you want to hire will have to increase your Placement Fee, so they can offer a commission to an agent that brings then a tenant.

Quote from @Josh Jung: surprised you haven't heard of RBP. it's like a mix of services you can offer to your tenants like renters insurance, virtual concierge, etc So the property manager/landlord pays for their renters insurance, and filters?  

@Jose Saladin you will likely not get a CO (certificate of occupancy) to be able to legally rent this out.

At that time we could renovate the ground floor apartment and potentially turn it into (2) apartments for a total of (5).My questions come down to how do we deal with the existing 40k mortgage, whether we can make it work so her parents aren't paying much in rent, if anything at all, and whether or not we set up any legal entity, like a trust to help the legal situation of paying off her sister down the road. 

You also need to register AirBNB units with the city, which means you can't legally do an AirBNB with a non-conforming unit. 

If they fail to pay the taxes, plus fees and interest, within that time, then the property legally becomes yours.

Your biggest challenge will be what to do when something goes wrong: nonpaying tenants, maintenance, mother nature damage, etc.Recommend you include these in any management agreement you sign, so you're not overcharged when you need these services.

If you need financial help, ask under the "Finance, Tax, and Legal" forum.

Lenders will want to see the filed Articles of Organization, an Operating Agreement that you can get from your attorney or, if you're brave and it's just you on the LLC, some people use Legal Zoom or Law Depot.