Help a relative sell at a higher price point or buy & hold?

[Mary Sutherland]

Hi all,

I'm looking to purchase a property from my aunt. She has rented the home for the past 30 years, and it's in an excellent location- the best possible neighborhood in her city. (When I spoke to the county assessor, I gave him the address and he said, "Oh, that's in the golden triangle. You can't go wrong." I have gotten the same feedback from locals and recent sale prices in the area agree.) My aunt was not aware of the true benefits of the home's location. It's a small house, about 100 years old, and she didn't think she could get above 125k for it. She offered us that price initially and at that price, buying and renting was a decent option. (We could probably get anywhere from 1100-1400/month in rent, and vacancy expectations would be very low. We'd know about the true history of the property and capital expenditures before purchasing-- misrepresentation wouldn't be a concern.) But we're not interested in hosing a loved one, so we did some research, and I've let her know the property is worth more than she thinks. Looking at comps, she probably could sell her home for at the least 25k more than what she'd thought without doing any further work on it. That said, comps in this area have sold for as much as 75-100K more with some rehab put in. My husband and I could purchase the property from her at a fair price and continue to rent it out for a much smaller cash flow return, but it seems like the best option up front- to help both her and ourselves- would be to lend my aunt the cash for some rehab and agree to split the difference in sale price between initial appraisal (prior to rehab) and final sale price. We could also just buy it from her as is, put in the rehab ourselves and then resell, but I want my aunt to reap as many benefits as possible as well. 

I know I'm not giving many specifics on the situation which would make it hard to advise, but I'm curious what more experienced investors would suggest as we move forward. I'm not going to do anything that puts my aunt at a disadvantage, so I'm only interested in options that would help us both. 

Is my plan completely naive? What am I missing? Are there other options I haven't considered?