Family member living in owner occupied multi family

[Tyler Adams]

I have a nephew graduating from college and relocating to my area. I'm thinking about buying another 2-4 unit multi family building with him on the loan and him occupying 1 unit so we can use an FHA 3.5% loan. I will cover all down payment, monthly expenses and manage the units On tittle I will give him a small amount of equity in the property and reduced rent while living in the unit. We will have a contract that states at the end of 1-2 years he has the choice to reimburse me for the portion of his down payment or sign his equity back over to me and I will refi so he isn't on the loan. He will get reduced rent in a very high rent area as well as a choice to buy into real estate with no money up front. I get to buy units at lower down payment and lower APR. What I'm hoping is he sees the benefit in real estate investing and will partner with us to continue and buy more units. For anyone wondering why I don't just occupy the units myself. I have a family with kids and lots of animals. We don't feel like it's far to our kids to uproot them every year of two. A stable home is very important to us for our young kids. I'm hoping someone has done a deal like this or has some in-site for us. Maybe a better ways to structure the contract or do's and don't. My lender said he can right the loan as long as all of us are on the loan. If I'm missing something please comment. We are in the planning stages and trying to work the kinks out.
Thanks. 

[Bill B.]

So in 1-2 years he gives you the 3.5% downpayment and he owns the building 100%? Or he gives you a “small amount of the downpayment” and remains a part owner? If you’re giving him say 5% ownership then he’d only have to give you 5% of the 3.5% downpayment (0.00175% of the purchase price) or $175 per $100k purchase price. 

I assume you’re either going to spell out the percent ownership on the deed (can you give someone 5% and call it owner occupied? I dunno,ask your lender.) but then you’ve pretty much locked in the $175. Maybe they have to be 50% owner and they’ll owe you $1750 per $100k? But then their rent should be 1/2 of market rent. Since they would be entitled to half the rent back as profits if they paid market rent. 

Is your plan in 1-2 years to put down another 20% out of pocket at a much higher interest rate to make it an investment loan? Why not just do that today, it would probably save you mioney at todays lower interest rates. Don’t get caught screwing over a relative or a lender to eek out a little more profit  if it goes to court you’re going to be the investor trying to take someone’s home away from them  

GL either way.