I’m looking into purchasing one of moms properties that has been a rental for 11 years and making it my first rental property. She owes about 70k on it and she’s graciously offered to sell it to me for the remaking balance, though I’d like to make sure she can get 30k in her pocket. Houses in in the area (Eastern WA) go for 300k-350k.

What I’m trying to figure out is:

1. I would like to make major improvements on the house that I’m thinking would be around 100k. What would be the advantages or disadvantages of applying for a 200k mortgage, paying my mom and then taking out a 100k personal loan from her to complete the improvements? 

2. Would it be better to apply for a 70k mortgage and then take a 130k line of credit on the house and roll that amount into a refinanced mortgage? 

I like the first option because there are less steps but I have a feeling she may run into a capital gains tax somewhere. That also could be the case for the second option, but I’m not sure and I’d like to minimize any taxes. 

Is there another option I may want to consider?

Thanks in advance!