Also, I've always wondered why arbitragers don't negotiate an option to buy upfront?

I do agree with @Jules Aton though, the best option may be to wait and save up for your down payment.

The truth is that if you find the right deal, you can make pretty much any market work but if you are looking for consistent deal success that narrows your options down.Some investors look for simple signs like the "Chick-Fil-A" test.

I have saved up some money but my goal is to save up at least 20k in a year before I start looking for options on house hacking in a duplex.

@Matt Cecala Love to see the expansion!

@Seidy Lasker Wash sale rules apply to stock options if they are deemed "substantially identical" to a security sold at a loss within 30 days, such as options with similar expiration dates or strike prices.

The best option would likely be a construction loan, which can cover both the purchase of the land and the build.

Another option is to estimate value based on potential income and market cap rates, which can give you an investor’s perspective.

If you are hoping that this property will stand on its own with you living in it and not having to put your active income into it, then it might not be the best option for you right now. 

Deal with it.Correct me where I'm wrong but Novations can be executed by either a Power of Attorney being given to the investor or by an investor just doing the paperwork, both being done after they secure their interest with an option contract (unless there's some other creative thing I haven't heard about yet).