Devils Advocate - Best Finance Options for first time Bulk Deal

[Cole Hagen]

Hi,

So a little bit of background before I ask my question: I am 24 years old and bought my first home last year and am currently house hacking it. My goal was to purchase 3 more single family homes this year and I have roughly 100k of equity in my current residence, have qualified for either a conventional home loan up to 100k and a HELOC up to 60k.

I was originally planning to buy a single homes as they come available but recently have been talking to a local investor who owns roughly 100 properties who is beginning to off load as they are all paid off and he is nearing retirement. He has mentioned a few times about selling me a package deal with either 5 or 10 houses at a time on a schedule that will benefit him from a tax perspective. In return, I would get a slight 10-20% discount on the properties based on current market appraisal rates. 

I have a few finance options available for a deal like this and wanted to get other's opinions before jumping in. 

Option 1: Apply for a commercial loan for a group of properties and pay the down payment and rehab costs with my 60k heloc (Ideally a $200k package with $40k down and $20k in reserves for upfront maintenance.

Option 2: The investor has mentioned the option of seller financing on a 3-5 year balloon payment (contract for deed) with 20% down in which I would then re-finance in 3-5 years per the terms to roll into a conventional or commercial mortgage.  Again, I would pay the down payment with my HELOC.

Any information on the positives and negatives on either of these scenarios would be greatly appreciated! If anyone wants to play devils advocate and warn me why I should reconsider a deal like this please let me hear it! Thanks and happy easter.