This arrangement would cause use to miss out on the long term vacation planners but also there might be a premium we could charge by being a short notice STR, much like airline charge more for tickets closer to the day of travel. 

However, the arrangement triggers some special risks for buyers and sellers, and it's wise to engage professional help to mitigate those and allow the process to run smoothly.Here's what buyers should consider before they finalize a seller-financed deal.Don't expect better terms than with a mortgage.You may need to sell yourself to the seller.Be prepared to propose seller financing.Confirm the seller is free to finance the sale.You needn't necessarily finance the sale for a long time.Good Luck!

Are there any verbal agreements or arrangements between the current Landlord and Tenant?

DM me or we can arrange to have a call.

Contemplating combining  the main floor bathroom with the master bedroom to create a master with bath suite.

Vacancy is very low because there is a lot of demand for this type of arrangement. 

You definitely need legal representation on this, with the will, sibiling arrangements as co-property owners, & with the landlord tenant issues. 

Maybe in this new upcoming market buyers and agents will become "savior" to understand rent to own arrangements. 

If it isn't a seller-financed deal, real estate investor and  "there are actually dozens of other ways to buy" other than a traditional mortgage arrangement.

How do I approach her family about finding her a better living arrangement?