There are some new hits that were recently announced from Fannie Mae for the LLPAs (loan level price adjustments) that will increase the cost/rates for second home financing.

You may find that what you own already works just fine, or that the yield on 400K is less than current CD rates.  

If you have credit card debts with high rates/high balances I would focus on paying it down to 15% to 30% Max balance to credit limit ratios to lower your DTI - Debt to income ratios, increase credit scores and be in a better position to buy more properties at a lower mortgage rate.

I wanted to propose he sell to me at a 20% discount and I would lease it back to him for an extended period of time. 

Both provide better services and better rates than banks.The usual credit application for a mortgage will want to see 3 lines of credit at least 6 months old and preferably 12 months old.

Pay cash huge discount and resell on contract at retail.

It will pay off the lien and the first mortgage and the rate will be cheaper than a cash out refi.

Anything you buy is going to come with the higher price tags of today's higher home prices and mortgage rates.

•The Notes will have a stated, fixed interest rate, ranging from 7.50% to 9.00% depending on the series of Notes purchased.

You would have lot of negotiation later on with buyer.If discount is substantial I am not afraid buying home with roof issue or lien, that's easy to solve when you have the cash.