First Time Flip Lending

[Samantha Hurley]

Greetings, all!

My fiance has a family member that is willing to sell us a house for way under its current value that she inherited from her adoptive mother, who passed away a few years ago. The house is in a bad state on the inside, but she will sell it to us for around $50,000. The current estimate on Zillow is $296,000, but obviously, we wouldn't get that much in the home's current state. Our thoughts are to buy it, clean it out, paint the interior, fix up the second bathroom, and put it back on the market. The question is whether to use the equity or do a HML. A little more background…

My fiance has around $100,000 equity in his current home, but we are hesitant to do a HELOC bc he doesn't want to risk the equity he's built up, this being our first flip. We've researched using a HML, but aren't sure which would be smarter and have less impact on us financially as a newly-married couple, since personally, I wouldn't be taking any risk or contributing to the purchase. I am a licensed real estate agent, but this would be my first deal. My credit isn't great either due to several factors (some beyond my control). His is pretty good (over 700).

With all that said, I am more than willing to give him more of the profit once it's sold since he'd be taking all the risk. In the grand scheme of things, it doesn't really matter since we'll be getting married anyways, but just for peace of mind, or if something goes wrong, do you think it would be smarter to go with a HML so we are equally taking the risk financially? I saw in another post that he could open up a HELOC as a backup, or for unforeseen expenses just in case, but we're really struggling with what to do here and don't want this project to negatively impact our relationship in any way.

Any advice or insight you may have would be greatly appreciated!