Perhaps we "buy" the house from them for the $328K balance to satisfy the lender and don't need a large down payment and then have a separate contract with them to pay $x per month until we've paid the full $172K amount.

There aren't many lake front properties in that area for sale, but there are a number that are in the 800k range.

We pay $850 for a WH install, so, that seems high but you are in CA.

To pay for this, I used a heloc on my current home.

Personally, If I could pull out a HELOC, I would use it to fix and flip which will typically make sense as you shouldnt be keeping the money out for that long and you can recycle it or pay it back and build off the capital that you got from. the flip.

I guess the different strategies FOR ME would be.A- Find a lender that would actually do the refi and pay the tax.B- Sell a property and use those funds to lend as they would go back to the IRA. 

For those interested, a combination of mortgages with no “due on sale” clause, mortgage companies loose due diligence, and title insurers willingness to “turn a blind eye” to practices that wouldn’t pass scrutiny now, resulted in tactics like the “second mortgage crank” which not only allowed investors to purchase properties with no money out of pocket but allowed investors to actually walk away from closing with “cash in their pocket”.

After all, you have no evidence they agreed to pay rent or any of the other terms.

If you have large debt with a high interest rate, I would consider paying that off before getting started investing in real estate. 

I also believe there is a small co-op in La Jolla but only infrequent sales so not good for estimating a discount.