My parents inherited 1/5th of a lakeshore property and small cabin. They are planning/considering purchasing the other siblings out and they want to sell, so no conflict.
Price agreed upon: $290,000
The cabin on the property is uncared for and dilapidated. It needs to come down. My parents are ready to put another 200-300k into the property to build new/renovate.
Their other inheritance from the estate comes to about $300,000 and my parent's pockets are deep generally (but thankfully frugal), so none of this is a financial hardship.
What is the best way to structure this process financially?
There are two pieces and two considerations for each, as I see it.
Land and construction, cash vs financing.
Let's say they have enough to pay cash for one and finance the other. Realistically, they may have cash for both, or at least close to it. Or maybe finance it all because rates are low?? I'm not sure
I'm thinking that a bank would give a better rate if they financed the existing property and paid cash for the construction, but maybe I'm wrong? And are there 2 "closings" (and therefore fees) with a construction loan?
They are inclined to use their cash now for the purchase because they have it and it's easier, but I'm thinking: rates are historically low, and financing the existing location may be smarter...
Who has experience here that can help me make an informed decision? Even a 2% swing between the options could be over $10,000 difference... Thank you!!