Unusual house flipping situation

[Nadine S.]

Hi everyone! I made my first post just the other day and was so pleased by the quick and informative replies I figured I would try another one.

My husband and I have the opportunity to purchase a home at a very good price from a family member that is now in an assisted living home. We are planning to put about $20k into it (hopefully that will be our max) and then hopefully sell it for a decent profit. With that information, I now have a couple questions:

1) Since it is a family to family purchase is there anyway to buy it without having to put 20% down?

2) I believe from the threads I've read so far I think we would be taxed at the ordinary income rate but just want to confirm.

3) Here is the tricky part. Since the house is paid for and the money from the sale is not needed immediatly we have the opportunity to renovate the house over a 6-9 month period before actually purchasing the property, however we would be responsbile for paying utilities and monthy property taxes during this time. This would be great for us because we could put our money towards the updates only vs. a mortgage payment and the updates. However, I just realized a caveat with this situation. Under normal circumstances if you spend $20k on updates you should be able to deduct this amount, along with some travel, meal, etc. expenses when you sell the home; if we are spending this money before we technically purchase the property will we have any way to claim these expenses?

Thanks in advance to everyone that is able to offer any advice/insight!