Buy property from parents and renovate it?

[Dennis Guinto]

Good morning,

I want to bounce some ideas off you guys and perhaps get some feedback. Here’s the situation:

My father owns a 2 Bds/2 Baths house (1190 sq ft) in Pasadena, CA. Nice little house in a nice neighborhood and approximately 25 min from downtown LA. It needs some upgrades and repairs before we rent it out or use it as an AirBnB. So my plan is to sell a different house I already own in WA. I want to use the money from that sale to pay for the renovation or as a down payment for my father’s house in Pasadena (if I decide the purchase the house). My dad and I had a few ideas on how to go about our plan.

Path 1:

I buy the house from my dad and use the money from the sale of my house in WA as a down payment. He gives me money for the renovation. We renovate it and rent it out or use it as an Airbnb. One of the reasons my dad prefers this path is because he only stays in this house once a year for a month or two. He lives overseas with my mom and doesn’t want to take care of it or worry about it.

Path 2:

My dad keeps the house under his name and I use my money from the sale of my house to renovate it. Once complete, we rent it out or use it as an Airbnb.

Questions/concerns:

What are some pros and cons with buying a house from my dad?

Rent vs Airbnb

I’d prefer renting the property out but with Airbnb we have the option to still use it when my parents are back in the US or I’m in town.

Background:

my dad/mom live overseas and stay in the house once a year for 2-3 months only. Once renovated and rented out they will stay with family when visiting the US.

I currently live in AZ (military) and stay in the house for a week or two once a year.

The house as it is, is approximately worth $850,000.00.

I’ll make about $100,000 profit from the sale of my house in WA.