An ironclad contract should protect your interests in the event things do not go as planned.

As others have said, the only reason to need an NDA on a SFR is because the party allegedly selling the property doesn't have it under contract and wants to protect themselves from a smarter investor who will actually get the property under contract so he/she has something to sell. 

We appreciate in advance any advice folks might have on how we could proceed with this deal while protecting ourselves. 

The lenders are much more careful these days and most will limit the LTV at around 75% to protect themselves.  

The delinquent taxes are being paid by somebody whether it is the bank to protect their interest, heirs or a tax lien certificate investor.

I'm just more curious if others have run into this as a common theme or if there is anything special I should do to protect myself with other tenants who may opt to do this. 

The major difference is in liability protection and there are also differences in taxes.  

Which entity would be best to keep us both protected?

Maybe  mileage or something, but that's a pain to document and file in itself.Are you looking for asset protection?  

It's not business property and it won't have protection under homestead laws, taxes could go up too.