I wouldn’t want to hold the loan for too long, so ideally it would be a 5 year term, presumably ballon payment at the end.

My plan is to buy the house subject to their existing mortgage, renovate the property, refinance it and pay off their remaining loan balance using the money from the cash out refinance.

There is a reason banks don't make loans on stocks.

You are going to want to find some good wholesalers in your area that can help you find distressed properties, or network/cold call some home/duplex owners in your area to see if you can find a discounted distressed properties, use the heloc to get hard money loan.  

However, if the loan is assumable, that could also be very attractive to a potential buyer and could end up driving what they pay you higher. 

Question: Should I collateralize the loan (if using private or hard money), or rely on roll-over loans (to maximize the lower points and 3-4% rate)?

I have researched the different kinds of loans for this but I would love to speak with any lenders or other investors in this area. 

Points for the loan 1-2 points, so now you are in $3,413 roughly. 

I spent years there in Jackson did probably 1000 flip loans to locals and owned at one time 200 sfrs..

I'm guessing an investor who could afford an $800K house wouldn't have trouble getting a loan, but maybe they would like being able to make a small or 0 downpayment.