Buying investment property in future tenant's name

[Leonid Sapronov]

First of all, let me say that I'm just starting out in this investment game, so some of my ideas may be a little "out there" - I'm just trying to be creative. :-)

A little background: my goal is to purchase my first rental property (most likely SFM) this year and I'm actively studying the market, as well as looking into various financing options. Now, coming up with 20% for a conventional mortgage is a little tough, so I'm focusing on relatively cheap stuff (I know there are other options, but for now I'm trying to evaluate how far I can get with conventional).

While talking to a friend, I had an "aha" moment - and please tell me if this is stupid/illegal. She (the friend) wants to find a new place to rent. I am looking for investment property to buy in the same area. Assuming I can get her onboard, is it possible to have her take out a conventional mortgage (say, a 3.5% FHA loan) fir a primary residence, buy the house that we agree on and live there as a tenant, while I cover all out-of-pocket expenses (downpayment, closing costs, etc.)? The monthly expenses (PITI) would be her responsibility, but we'd make sure to find a house where those payments would be less than what she'd pay if she were to rent. Ideally, I'd like for the deed to eventually be in my name. Is a complex transaction like this possible? What types of contracts/agreements would have to be signed by both sides?

Basically, I'm trying to create a win-win situation, where I can buy a house with little money down and have a trusted tenant, while my friend saves a little bit on the rent. Of course, I want to do this legally! Any advice greatly appreciated.

-Lenny