Need Creative Financing Solution Strategies

[Miles Presha]

Let me apologize in advance for this soon to be complex issue. or those of you who love crunches like this, this is for you:  I need some advice for a friend... 

Johnny currently lives in a house with a lease option in place.  The lot is around 7000 SF, which might allow for construction of a smaller unit to rent out. Johnny has a tax lien that is holding  him up from getting a loan.  The purchase price on the lease option is super cheap because the house needs work,, but  Johnny will be walking into a ton of equity when he becomes the official owner. 

Johnny has put some money into the house already to make it liveable.  The house still needs paint and yard work. Johnny pays cheap rent to the owner, which is contributing to the  down payment of the purchase price.

The house Johnny lives in  also has a lien on it, because the seller's mother left behind a sizeable nursing home debt.  Once the house is sold, the lien will be taken care of and the seller will walk away with a profit. 

Johnny made a promise to the seller that he and his family would take good care of the home, and plan to live there indefinitely.

Johnny wants to eventually use the equity in the house to invest in real estate whenever he closes. 

THE QUESTIONS:

• Should Johnny get a hard money loan to purchase the home and make repairs, then re-fi 6months later to access the equity and invest?

• Should Jonhny get a conventional loan and wait 6 months to refi and do repairs?

• Is there a way Johnny can acquire seller financing and get equitable title to the property eventho it has a lien on it?
• What would you do if you were Johnny?