Also, your investment is usually secured by the underlying property and a personal guarantee. 

We've been trying to get the final tally so we can file a judgement and have the security deposit transferred to us.  

@Edward Oliver if you currently own the property you should be able to just secure it.  

Buying with cash is the safer more secure route but if your goal is to eventually become a full time investor you cannot scale the business using just cash.

Bring a general contractor with you to the property and let them teach you how to identify problems and opportunities for improvement to bring the property to its full value.Go down to Home Depot and other individual wholesale materials stores and get a list of prices for everything you might use on this flip and every future flip.Go to the professionals desk at Home Depot and ask about discounts for bulk items purchased.It takes practice and a lot of trial and error at first to perfect the techniques to estimate costs.

Correct me if this is wrong, but securing the property with 100% financing is just to ensure the seller doesn't sell to someone else or get cold feet while the wholesaler finds a buyer?

Some examples of improvements include: a new deck, storm windows/doors, wall-to-wall carpeting, duct work, and insulationHere is link to a great forum discussion regarding this topic of Cap Ex vs Expenses: https://www.biggerpockets.com/forums/51/topics/70013-techniques-to-report-capital-improvements-as-repairs

Unlike passive rental income, the income from an active trade or business is subject to self employment tax (a nasty 15% tax commonly referred to a "social security and medicare" by working folks).

Does this mean the only way to safely buy at these auctions is to secure redemption rights prior to the auction, by contacting the current owner and negotiating a deal?

This type of investment offers relatively secure, high returns that make the fees of self-directed accounts worthwhile for me.