You will make more from loan pay down, yes you SHOULD have some appreciation.

I know that interest on the acquisition loan can be included in the cost basis since it’s inventory.

If not, you could consider refinancing Home 2 with a rehab loan.

I can only imagine that they got a bunch of big time investors and business loans to grow this out.

Are you using the 10% down second home occupancy loan?

We were able to get into it with a 5% down primary residence loan.

Small talk, showing empathy, and expressing genuine interest in their situation can go a long way in establishing trust and goodwill.Be Willing to Walk AwayOne of the most powerful negotiating tools is the ability to walk away.

If they have a good interest rate it might be worth looking to see if you could assume their loan to take advantage of the lower rate.  

Will they finance 100% of the purchase and renovation or will they want skin in the game (you putting money in).Most do not do 100% funding so beore going down more rabbit holes, make sure you have the $ aspect situated first.

And if their both right or wrong-how to handle this situation?