Is it legal to offer to rent the property back to the homeowner who already lost their home to foreclosure when negotiating the redemption rights purchase? 

From a legal standpoint, sure, it's not much different other than the paperwork and govt red tape.

This eviction altogether cost me $20,000 - legal fees, lost rent, and rehabbing.

I will preface this with the fact that I have a legal background, specifically with estate planning and asset protection.

There are some legal considerations as well as practical considerations 1.  

Hey Deirdre,To address your questions:Providing freedom by handling day-to-day operations.Offering peace of mind through proactive maintenance and tenant communication.Reducing risks by staying ahead of legal requirements, tenant screening, and dispute resolution.Enhancing the bottom line by identifying cost-saving opportunities while ensuring tenant satisfaction to reduce turnover.Is the experience still important when the property thrives financially?

Are there other legal or financial consequences I should be aware of?

I understand this is not a requirement, but I have never received a damaged unit from an inherited tenant or any legal issues.

So when my clients work with me, I simply guide them through the process of originating their own loan (legally, in the states that allow it).

It is legal and very lucrative in some parts of the US.