Buying a property from a family member

[Jeff Higgins]

I have a question regarding a purchase of a rental property from a family member. My wife and I are going to purchase a single family home from a family member. They are selling it to us for what they owe on the house plus a little bit extra cash. Total purchase is 70K. We have a rehab budget of 30K. we are trying to do the BRRRR method and our family member is willing to just allow us to pay their current mortgage while we fix up the house. We then want to get it rented and refinanced and pull out the equity which we will create with the rehab, in order to fund our next property.

The question I have is how can we do this while not technically buying the house from our family member? The bank would require us to put 25% down of the purchase price which we could do but it would kill our rehab budget. one thought was our family member would float us the 25% and then just forgive the "loan of the 25%" but I am afraid that would be considered gifting and would cause them to encore a gifting tax. The other thought was to quick deed us onto the title now and then we can buy them out of the property once we refinance.  I am sure we are not the first people to do this so I was wondering if anyone had any suggestions.

Thank you in advance for any suggestions or ideas.