Looking for creative ideas for a real estate proposition

[Steve Honey]

Parties:
Me: No home or family. I do fine and have above average savings for my age. 

Father: Owns home. Retired. In fine financial shape. 

 Brother: See below.

Background: I have a lovely older brother who is currently living in a major metropolitan city. He and his wife own an apartment - mortgage 30% paid off. While the apartment was perfect for hubby, wifey & kid #1, the addition of kid #2 makes the apartment tight.

My brother is looking to move to a bigger apartment to fit everyone. While my brother does fine, the area’s real estate situation puts a suitability sized apartment a bit out of reach for him. He approached my father for financial support to help him buy a new apartment. My father would cosign and help with the down payment & mortgage payments.

My father, not wanting to favor any kid, asked me how I would feel about this. He suggested rather than weigh my emotional comfort level, try to look at it as a business opportunity. Both me, my brother and my father have said we are open to creative ideas that would help both my brother’s and my financial situation. My father is far more concerned with ensuring my brother does not get a significant windfall that I do not get rather than hoping to profit.

My question is how could I make this a win-win for me & my brother and make my dad comfortable by ensuring we both benefit about equally? Other solutions to the ones I outline below are welcome

Some Idea: My father made it clear he would be most comfortable if both my brother & I were to have a stake in each apt so that we could share in the appreciation of the properties.

• (1) Perhaps, me, my brother & father form an LLC. The LLC buys my brother's current apartment (apt #1). This would allow us to save on a broker fee. The LLC runs it as a rental property.
• (2) Perhaps, my brother & father all buy the new bigger apartment (apt #2) but give me some ownership interest (is this possible – maybe I would have to with the down payment). When they sell in X yrs we get to share in appreciation?
• Essentially: how do we leverage my father’s financial ability and two properties (one a rental and one lived in) to make it so both me and my brother both win?

Considerations:

• Tax write-off: Home mortgage interest deduction – hopefully we could make I so my brother and father are the ones paying so they can reduce their taxable income. Cap gains extention
• Capital improvements: We would have to structure this so that the party that improves gets the end benefit.

Note: I have heard many times not to mix business & family. We plan to look at the whole situation with sober minds and clearly outline expectations. So while this is still something to consider, I would rather hear more financial advice.