Tapping Into House Hacking Benefits By Helping My Sister

[Mario Cuartas]

Hello Everyone, 

My Sister Just got married and with high interest rates, and high cost of homes in Utah, it’s going to be really hard for her and her family to afford buying a home. Rentals are also hard because they are so expensive . I have spoken to her at length about house hacking. And I got an idea that could help her get into a house but could also help me continue growing my investment portfolio. I just don’t know if it is possible or legal. So I would like your advice.

My idea:

My sister and I would build a fourplex together and finance it as owner occupied. Her and her husband would live in one unit and the other three units would be rented out. 

I would put all the money for the down payment and closing costs. We would both be on the loan. However, since I put all the money down, we would also come up with an agreement that I own the three rented units and she owns the unit she lives in. Her mortgage would be equal to 1/4 of the mortgage and then I would rent the other units to cover the other expenses and my 3/4 portion of the mortgage. Eventually, once the units have appreciated a bit and the mortgage has been paid down to the point we have 20% equity, we split the parcels into individual town homes and then she refinances her unit out and I refinance the three units out or sell them. 

Benefits for my sister:

- She gets into home ownership without any cash up front because I paid all the money down.

- She starts building equity on her unit rather than renting. 

Benefits for me:

- Buy 3 units with only 5% money down.

Question I have?

- Is this even possible and legal? 

- What are the down sides? 

- Have you heard of this being done before? 

Best, 

Mario Cuartas

[AJ Wong]

HI Mario. Very kind of you to consider investing with your family and very possible for you to be the co-signor on a property for your sister's family. My sister co-signed for me on a primary in 2019. Would definitely want a strong private agreement but all parties could remain on title with allocations. An FHA loan or conventional would be a good loan product and can use the existing rents to help qualify. Gifted down payment funds are generally allowed. Connect with @Joseph Chiofalo for help with structuring and investor focused mortgages. 

Good luck!