HELOC or home equity loan on seller financed property?

[Christopher Oliva]

Hi Everyone, rookie-ish real estate investor here. I currently own one duplex that was purchased using a traditional mortgage a few years ago, and I've got a goal of buying at least 2 STRs in the next 12 months. Here's my question/situation...

TLDR: Relative is willing to sign deed on inherited house over to me, I'm wondering if I can get HELOC or home equity loan on this house to fund rehab and the purchase of an additional investment property.

Recently a relative inherited a house that needs some work, they don't want to hold on to it and offered to sell it to me. Original plan was to buy it from them at a great price via a loan from a bank with an eye on taking out a HELOC or home equity loan to fund the rehab, but my relative told me a few days ago they'd rather just let me make payments to them directly instead of me having to get a loan. We will sit down, crunch the numbers, and agree on terms that work for both of us (purchase price and monthly payment, they don't want to charge me any interest). My plan is to turn this property into an STR, I've done some due diligence and I'm confident I'd do very well with this as an STR.

My relative will do whatever needs to be done in terms of title/paperwork to make sure I can still get a HELOC or home equity loan, they essentially told me they'd be willing to sign the deed over to me if that's what it takes. I offered to get some legal docs drawn up to make sure they're as protected as they can be, but they insists they don't feel that's necessary. I on the other hand would prefer to have something in writing rather than simply having them sign the deed over to me (or my LLC that I plan to create specifically for this property). For what it's worth, I did explain to them that if I use the house to get a HELOC there's a risk the lender could call/cancel the HELOC.

Given my situation, does it makes sense to get a HELOC or home equity loan to fund the rehab and if so, which of those products would be best to go with in today's market? Also, could I use the HELOC/home equity loan for the rehab AND to buy an additional investment property?

Aside from the HELOC vs home equity loan question, I'd appreciate any insight on getting some legal docs put together to make sure everything is done properly and also to ensure my relative is as protected as they can be.

Thanks in advance!