If you're suggesting he pull equity out of current residence, use it as a downpayment on new residence, and turn current residence into a long-term rental, that's a valid strategy, however he would have to evaluate ROI on the potential rental, and be able to qualify for the loan on new residence with a higher DTI ratio.

@Jay HinrichsPlug in any 40k equity for the trailer.

If things cannot be made to work in your favor you can always walk away from the purchase or even making an offer.

You should be seriously looking into pulling out all the equity possible.

That said, we'd need to a bit of foundation work first so the lax agreements could work in our favor since they won't be able to be open for a period of time. 

Owner occupying may allow you to put little down especially if your current property has decent equity built in.

I have more equity in this rental than my primary home (500K equity with appraised value of  700K) vs my primary residence that has about 200k in equity and a value of about 750K. 

Brian, if you have a lot of equity in your home get a HELOC on it.

I don't necessarily need the equity for anything specific for the next year or two. 

The down payment and rehab budget would come out of my home equity line of credit and I would get a new mortgage on the rest.My father will do all the rehab and manage the property, physically.