Parent Gift for 2 Family Investment- How to Structure Ownership

[Ashley L.]

Hi All! Just purchased my second investment long-term Hold Property. Because it ended up that I couldnt use an FHA due the proximity of a gas station to the house, my parents decided to own the house with me, contributing to the downpayment, and i would do a homestyle mortgage (15% down mortgage with 115k reno loan built in). So it would be $475k purchase price+$115kish in Reno...108K down total (that includes the 15% downpayment plus closing costs). My parents gifted a total of 35k, and my husband and I put the rest in.. a little less than 75k. My husband and I have been trying to work out these financials with my parents to see how this will be fair. My husband and I have to live in the property for 1 year as primary residence (just like an FHA) and we are the ones on the deed because my parents credit isnt good enough. We will renovate and rent the upstairs apartment out at 3800/month and, after 1 year, we move out of the bottom, and we will make another 2500/month on that unit. Our mortgage payment is approximately 3800/month. During the first year while we have to live there as primary residence, once we rent it, basically it is a 1 year wash with no cash flow and we just break even, as the rent coming in is the same as our 3800/month mortgage payment. After we move out after 1 year, we will then be making positive cash flow of 2500 from now also renting the bottom unit (yes NJ rent prices are astronomical). So, what we are trying to figure out is, if we put in 75k, and they put in 35k, and then we live in the house for 1 year rent free (basically 2500x12=30k) do we then add that non-paid 30k rent to what they contributed and now we are basically almost 50/50 on ownership? My husband doesnt think it is fair still, but since we are living rent and mortgage free for 1 year, my parents think it is fair that we then have 50/50 ownership after 1 year. We are all so confused on this, as it is a very unique situation, and even my accountant brother is having a hard time determining what is fair here. What are all of your thoughts?? Help!