Funding a family member's first home [house hack]

[Eric Decker]

As you'll no doubt notice, this is my first post. Just want to first say thanks to everyone who contributes so much free knowledge on this platform!

I am new to REI, closing on my first investment property in Pennsylvania later this month, and looking forward to next moves. One which seems on the horizon, is helping my brother and his family buy their first home. They do not have much in savings, so a multi-family house hack seems like the way to go.

Although through searching I did find many posts encouraging folk away from LLCs in house hacks, I do not see much addressing this specific setup. What would be the best approach for me to fund the deal and qualify for a 3.5% down loan?

It seems like we would have two options:

1) Fund it as a "gift" purchase and trust in my brother to not screw me if he is the sole owner.

2) Fund it as a "gift", transfer to an LLC shared by my brother and I and risk "due on sale" consequences.

/queue deluge of folks advising against mixing family and business