Financing options do exist: hard money loans, renovation loans, and some traditional mortgages can be used on distressed properties if criteria are met.

Another option is moving out of your place and doing a house hack.

They are also based in the US so this is a good option for many. 

Not sure what rent they were willing to pay and what options are in your area but I would likely want to keep the STR going to and have them rent a nice LTR nearby to you.

I'm not an attorney but to me this offers no benefits.

Once you’ve identified STR friendly locations, figure out your financing with your brother to help narrow down your price range and market options.

Quote from @Kathy Grossart: Can a non-accredited investor in an already established SDIRA, within a 506(b) multi-family syndication, do a 1031 exchange to another syndicated property (with same operators), if the new 506(c) offering required investors to be accredited, and the investor is not? 

Quote from @Ryan Davies: We have heard of them but have chosen not to close deals through them since we have found better options.

@Olecia Williams Though it's still possible to purchase a second/vacation home with only 10% down, it may not be your best option. 

Unfortunately, this reassessment is unavoidable, so you’ll need to evaluate whether transferring the property is worth the potential tax increase.If a Transfer Is Not Feasible:If the potential property tax increase makes the transfer impractical, an alternative option is for your father-in-law to secure a Home Equity Line of Credit (HELOC) on the property.