Ways to finance: buying empty home from family member free/clear.. easy finance optio

[Edward R.]

Hi! This is a 4thhome I'm buying; kept two others and do STR. My sister is looking to unload our childhood home that she inherited 7 years ago. she had it rented out (kind of) and because she's living out of town and so much work needs to be done and she can never do it. We talked and I told her I'd be interested in it (1800 sq built in 1952; 1+ acre fields behind that are forever wild; mid-century feel to it newer vinyl siding/newer windows/new roof). I told her not sure what my end game would be yet; STR or maybe sell in a few years depending how it turns out.

Offering $120K whcih is pretty good for the conditions and worse/smaller homes selling for that. I'll likely put 60K of work into it. ARV is likely $250-280K. What would be a good option for financing it? Getting a mortgage on it, having her hold A mortgage on it, promissory note or other ways to work it? Our credit is excellent; we could pay it all in cash by shifting finances around. I like the cushion idea of giving her $50-75K and pay it back within 5 years.

For our previous investment properties we used a home equity loan and cash to buy and paid it off in a few years.  Houses in our area still sell fast and limited inventory and future growth is anticipated to continue marching higher.  I'm not worried about the house selling or losing value; Well always worried but anticipate and manage costs and calculated risk. 

[Dan M.]

This might sound dumb but have you talked to her? What would she like to do? If shes onboard with your plan of taking out 50ish k mortgage and take the rest in cash then do that. By doing so, from her perspective, if you miss a payment she keeps your 70k and takes the house back so thats really good protection. She can earn a little income by the interest she charges you, and any value you add to the home is hers really if you default. Its the ultimate no to low risk for her and that suits your plan of taking ownership. When you sell, her mortgage gets satisficed and you keep the remainder.  Just talk to a competent title company or attorney it should be really easy and low stress.  

To me that's the easiest lowest cost scenario.  Hard money is expensive and they will not hesitate to take the house from you if you don't meet the terms of the loan.