Buying House From Family

[Bryce Brown]

Hello,

I am looking for advice on structuring a purchase from family. My grandfather recently passed away and my parents have had his house in their name for many years. I have always expressed interest in purchasing the home once it made sense, and to turn into a rental.

My parents are onboard with me purchasing the home from them instead of going to the market. I plan to pay market value, but they’ve expressed possibly giving me a slight discount of maybe $10k less than market value.

The house is in good condition overall, but will need cosmetic upgrades mainly to the bathroom, and kitchen. I was planning on using the BRRR method for this, but then a new idea came to mind.

Since nothing is owed on the house, my parents would be fine letting me update the house to use my available cash before getting a loan.

Using easy numbers, let's say my parents agree to sell me the house for $100k. If I put about $15k into the house and the ARV is then let's say $170k. Could I then get a loan for the property and request $40k back at closing? Would that be taxed since technically my parents would be writing a check at closing back to me?

Is there any other creative ways to do this deal with it being with family? I’ve considered a land contract, but I feel as my parents would like to receive a lump sum from the property vs. me making monthly payments to them.