Once I'm done with the renovations and she moves down, I will do some light Reno work on her current residence and use it as a rental property (essentially kind of a trade).

How many beds, bathrooms?  

You can also pay extra to essentially turn it into a 15 year mortgage.Now on the bigger more important question.

That's essentially what you're addressing, but with the concern of building equity and putting your capital to its highest and best use.

We will need to redo our kitchen including new cabinets, redo our entire bathrooms, new floors, paint baseboards etc.

Remodeling bathrooms.

When considering the rehab we wanted to do a lot of the work ourself—mainly kitchen/bathroom/bedrooms.

(This is about taxes)You need a Zoning Permit for Visitor Accommodation:To rent your home for stays of 30 days or fewer.If the property is not your primary residence.Housing requirementsSmoke alarms must be installed:In each bedroom.In the hallway in the immediate vicinity of the bedrooms.On each floor of the home, including basements.Carbon monoxide alarms must be installed:Within 15 ft. of the entrance to every bedroom or within 15 ft. of a bed in sleeping areas if there isn’t an enclosed bedroom.Centrally on a wall or the ceiling, but not directly in front of a door to a bathroom or within 5 ft. of a cooking appliance.Under the installation requirements for smoke alarms if they are combination smoke and carbon monoxide alarms.You can’t post signs for lodging on your home.The home can’t be occupied by more than three people (including the owner and renters) who aren’t related by blood, marriage, life partnership, adoption, or foster-child status.You cannot change your house so that it no longer resembles a private residence.Information you must provide your rentersRenters are only allowed to have guests between the hours of 8 a.m. and midnight.You must tell renters the trash and recycling collection days and any trash disposal rules and regulations.

The bathroom walls were torn out and there wasn't a tub/shower.

Who knows, maybe a prior owner already did so.Reaching out to suggest deeding the disputed area or granting an easement is essentially surrendering the land.Never trust Google or tax maps as a substitute for an appropriate land survey.