The only ways I know of to finance a home like this is a 203 Rehab loan, cash. A home equity loan is probably going to be an interest only, adjustable rate loan, which is not ideal at all, when rates are on the rise.

I think using home equity line to purchase REO homes is the easiest way to do it.

I would be beyond cautious of any realtor's estimates for repair. They want a sale, and they will use their pet contractors to give you unrealistic low ball pricing for repairs. A home that needs to be gutted to the studs needs to be gotten at .10 on the dollar to ever be either profitable, or actually worth gutting. Unless you are a 100% in the trades

DIYer. Also, be aware that many urban area's anti neglect ordinances may come into effect on such a purchase. For someone out of town, this does not sound like a good deal at all, Especially if you need something that is safe and legal to occupy in order to move.

There is the 203k loan (rehab loan) and that is an FHA product. There is a similar rehab loan for conventional mortgages. The advantage to using a rehab loan is that you don't encumber your current house. The disadvantage is you will not be able to DIY any part of it (usually). You have to have your vendors and bids all lined up before you even make your offer to engage this type of loan. Some people prefer the HELOC on their current home to do the repairs because it has the most flexibility for hiring subs and contractors for the rehab. Get a good lender in your corner and discuss options.