Which purchase option to secure this deal ASAP!?
Hey everyone. Wanted to get some opinions on my options here for a house I am looking to buy form neighbors. I am trying to figure out what would be the most cost effective/rapid way to do this.
1- My original plan was to purchase ($300k) with 5% conventional. Use private money for renovations, then refinance 6-12 months later after renovations. Cash out refinance for 80% LTV of $550-$600k after repair value. Pay off original loan and private money and have new mortgage for ~$450k. Built in 20% equity with theoretically no money out of my pocket. 2 sets of closing costs here- at the conventional purchase and then refinance.
The family member who owns the house is not doing great and if she passes away, the house will be put into a trust and will take months to reverse and get that squared away. So now the family wants to do this quick after they finish cleaning the rest of the house out this week. Additionally, I feel interest in property from other people (guy who owns the dumpster company they are using, landscaper, etc.) Although they told me I have first option to buy, anyone can come in here and make a pretty cash offer. These two reason have led me to option 2:
2- Purchase the house in cash. Mortgage would take 60 days to close. Get this sale done quickly with cash so there is less time for someone else to try to purchase it. Also so that the family member doesn't pass and put the house into the trust.
If I purchase with cash, I have no money for renovations. So tap into a 2.99% first yr introductory HELOC since I have 100% equity. Use HELOC for the renovations, then refinance out when renovations are complete. Pay off the HELOC and the $300k private money used to purchase. Three sets of closing costs here: 1st- cash purchase (assuming there would be a small cost here to close- just to my attorney). 2nd- Closing costs on the HELOC. 3rd-Closing costs on the refinance. This might be more expensive with more closing costs but may be worth it to secure the deal ASAP.
Only other problem with option 2 is that I was told I wouldn't be able to get a HELOC until I have my copy of the deed which can take 4 months.
What do you guys think is the best option for me here? Any other advice and ideas are greatly appreciated!