Why not buy it with private money, borrow enough for the purchase/repairs/carrying costs, and then refinance once the repairs are done?

If they had taken option 1 would they have received more money? 

It depends if you have a lien on title already (a mortgage or hard money loan), but I would either do this as a hard money refinance or a DSCR cash-out refinance to pay for the reno. 

It's a sad way to make money IME.

AVR was good and we pulled 90% of our money out at refi time.

You will lose peoples’ money if you do this deal.

For me it's capital, I have more leads than I have money. 

@Nick BednarczykI think people also need to understand that fed rates are not directly correlated to mortgage ratesMortgage rates are more in line with the 10 year treasury which could remain high if we continue to spend money like a drunken sailor

If you want to buy a home and live in it for a few years before renting it out, I will look at low-money down conventional/FHA options; if you cannot qualify conventionally with your DTI, I would look at DSCR loans.

Or maybe you end up doing all the renovations and management while your princess of a sister does nothing but spend the money on new shoes.Better to be your own man and make your own path.