If you're doing a rate and term refinance, there's typically not a seasoning period but again it's common for lenders to require it be rented first.If you're doing a DSCR cash out refi, it may not need to be rented first but you're probably paying a higher rate.Your best option is to call a loan broker you trust and go through the options based on your current situation.

Similar situation where I was forced to update while it was occupied.However I know once I have to update the entire unit, I’ll be spending quite a bit as the kitchen is outdated and the place needs paint and either new LVP put down or sand and stain the existing hardwood. 

I bought a small pool of 4 loans for around $25k total, they were low balanced loans with in different situations (BK, FC and performing).

Many investors in your situation also explore seller financing or subject-to deals to minimize upfront costs, especially if they find a seller open to creative terms. 

However, they have a direct contact in the department who can come out sooner once the secondary cleanout starts backing up again.Would appreciate any advice or insight from those who have dealt with a similar situation!

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. 

Do this before rent just stops, and you're a worse situation.

Would this situation qualify?

This impressive 7,000 square foot property is situated in an upscale Boston neighborhood.

Firstly, I think this answer will be highly dependent on each investors current situation along with their long term goals!