Cash Deal or Finance

[Grace Hinton]

I'm looking at a vacation property purchase on the east coast in a small vacation town on the ocean (I am on the west coast, but want to spend more time in the east). The property is two parcels being sold together, one with a small house in need of work on the larger parcel; the second parcel is non-conforming and vacant. The purchase price is well below the tax appraiser's valuations by 25%. My plan, after checking with the local authorities, is to change the lot lines to make two conforming parcels, and build a new house on the vacant property. My question: I'm wondering whether I should pay cash for the whole shebang, then divide the properties, then refinance both. I'll need a construction loan for the new house. I plan to make minimum upgrades to the small house; then put it in a vacation rental program or rent it straight out. The new house would be a vacation rental as well, sometimes occupied by me on a short term basis.