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Renovation loan or traditional and pay for renovation out-of-pocket?

I’m curious about what the best route on a renovation loan versus just a loan against the actual purchase price of the house in a pricey neighborhood and footing the renovation cost. Quite literally the worst house in the best neighborhood.

Let’s say $500k purchase and $200k renovation, $800-900k post renovation appraisal.

I’m wondering if it’s better to pay for them separately, or bundle them all together in a renovation loan and have to pay for the mortgage at the new appraised cost, as opposed to the purchase price.

I understand taxes are always a thing, but I’m curious if doing them separately and anticipating paying taxes at the end of the year would be a cost save in the long run.

We have a nice inherited nest egg that we’re not touching and we want to make this work within our current means. Without disclosing too much, we’re in a house with a $2,400 mortgage now and could comfortably 2x it. We also have 400-600k coming within the next 5 years that I plan on 1031 exchanging into our mortgage. Just can’t predict when based on multiple factors.

TIA!

submitted by /u/KawhiTheKing
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source https://www.reddit.com/r/RealEstate/comments/1hdxs0a/renovation_loan_or_traditional_and_pay_for/
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