Buying a unit with family

[Josh Marble]

Hi everyone,

I have a unique problem that I'm having difficulty coming up with creative solutions for. Here it is:

My wife and I are looking at ways that we can help my sister-in-law and her husband finance a home, while having it also make good financial sense for us (i.e., we definitely want to help them out, but we're also looking to get a decent return on our investment in the long-run)

My wife and I live about 4 hours away from them. We have about $250k left on our mortgage and our house is valued at about $430k. Our combined income is about $220k/year.

They live in the GTA (Toronto - one of Canada's most expensive real estate markets). They have both have decent jobs (about $170k/year combined pre-tax income) and currently could put up about $100k on a down payment. The problem is that houses in their area are closing in on $1 million for a 2 bedroom and they're having difficulty getting financing. My wife and I have been in the workforce much longer, so we have a lot more wealth built up as well. 

Everyone involved is open to the idea of owning a single family home, or a multifamily home, with the in-laws living in 1 unit.

Some options we discussed are:

1) Just doing a 50-50 split on a single family home, where for example we put down $100k and they put down $100k and we all split mortgage payments evenly, and of course my wife and I own half the house. Then when they eventually sell, (doesn't matter to us if it's in 1 year or 20 years), we split it 50-50. The problem I see with this is that we're paying the same as them, and they're also getting a place to live out of it, so it's uneven split in favour of my in-laws. How could this be balanced out to account for this? Is it usual for them to pay 'rent' to us in a situation like this? Or maybe they pay a larger chunk of the mortgage payments? E.g.: 60/40 or 30/70 split.

2) Similar idea as above, but with a duplex or triplex instead. My in-laws would live in 1 unit and we'd rent the rest out. If my wife and I weren't involved, it would be a simple house-hack. But with us investing half the up-front cost, and my in-laws living there, it complicates things again. This would have the benefit of my handyman brother-in-law being on-site, so no property management group needed! But just like with the first option, it seems like a very difficult thing to structure financially that makes sense for everyone.

Anyway, I could go on and on about possibilities, but I'm curious if anyone has seen a situation like this before, or knows a good article/resource on this.

Thanks in advance!

Josh