Purchasing Property With Another Family Member

[David Emerson]

First time posting on the BP forums so please excuse the green behind my ears, but I appreciate any and all insight here!

I'm looking to purchase a first residence in the Providence, RI area for house hacking purposes. I, personally, am a first time home buyer with what I believe would be considered excellent credit and sufficient income. My original plan was to focus on a multi-family and rent out the unoccupied unit + unoccupied rooms in the unit I plan on occupying, or a single-family and rent out the unoccupied rooms. In my head, I was planning on putting anywhere up to 10% down with most properties I've been seeing are listed (although I've heard the bidding is crazy in the area) around $300k, give or take. 

However, my family member that is financially independent and is sitting on a sizable amount of liquid assets (mainly cash, brokerage, and penalty free distributions from retirement accounts since they are of age) that has always wanted to purchase a rental property. This family member is happy that I am expressing interest and would love to be a part of a first rental property. They are not overzealous and I'm sure this may be a one-time endeavor for them, but we have discussed what our interests are and are seeing eye-to-eye on this.

This family member purchased their first home with 20% down, was quick to pay off their mortgage, and has always lead a debt free life (as do I at the moment). They are adamant that they do not want to pay PMI and would want to put down at-least 20%, most likely more. They don't mind putting up more cash up-front relative to my contribution while remaining equitable partners.

With the context out of the way and getting to some actual questions...

• - The thought is that the property would be under my name. With funds coming from both myself and the family member, how would this be viewed by a lender? Would there be any potential roadblocks to consider?
• - How do these partnership approaches generally get structured from a legal/contractual perspective?
• - What are some key action steps you might advise for a first time investor/buyer? Things to consider in Providence, RI specifically?

[Luan Oliveira]

@David Emerson

Have you thought about house hacking for yourself and then purchasing a a rental property with your partner?

Give as low a down payment as possible on the house hack and save the rest of your money for the rental. That way you can take advantage of the low down payment and also get a head start on a second one!