If the new owner gets title insurance, the title company will usually discover the tax sale and redeem at closing.

@Bryan Schmidt It sounds like you will need a construction loan to fund the improvements even if the seller were to offer you a second position mortgage for 20-30% of the purchase price.

Typically its 80% of the total cost of the project or even 20% down of purchase price, funding 100% of your rehab.

If it makes a difference, the DIL could purchase in her name or in her construction company's  LLC name. 

Also are appraisals always required I know that some companies used BPOs.

While I don't have enough experience with either company to say one is better or worse for hosts than other, I've always found VRBO to be the far clunkier and less user friendly by miles.

We also have a general construction company that is taxed as an S-corp.

This property has been so hands off I have not thought about in years like I should have and i do NOT have the time to educate myself to say the least (I run a company). 

@Devin Cutler I've had lenders tell me the funds cannot be used for things like "business purposes", "educational uses", and "new property purchases".

Does anyone know of companies that have acquisition managers that they can place with a small real estate investment firm?