Do not rely on it for legal advice.

So I contacted the tax collectors office and was told there was a legal loophole and that since the building had been owned by a non-profit for part of the year it would receive tax exempt status for the full year.

This is both a legal and tax question. 

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? 

Additionally, tenant issues and legal complexities around eviction can make management more difficult.

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

Yes, I have general expenses that are not attributable to a single property, like legal and accounting and home offices like you mentioned.

I did serve a 5 day when they were late for rent and can legally nullify the lease and do a 14-day notice in Wisconsin and escalate for an eviction if it happens again. 

As you are partnering with your sister, have a legal document drawn up as to what happens if one of you wants to sell and the other doesn't, how expenses will be split along with money you are putting down, borrowing, profits, etc. 

It's basically a legal 2-unit that can cashflow $900/month.