Duplex Investment w/Daughter as Home Owner

[Rachel Deering]

My 24 year old daughter and I were looking (and found) a duplex to buy in Pennsauken, NJ. Our plan was that it would be a primary residence for her with me as a co-signer and I would make the down payment and all upfront costs. She would get a great deal on the house and a lot more for her money than she would get in a rental. After she moves out, we will split any profit from renting the 2 units out. 

My question is what would be a fair way to structure this business deal? The market value of her unit is $1100 and the other is $700 per month.  The total mortgage including tax and insurance is about $1300. If she ONLY paid the balance of the mortgage payment after the other tenant's rent, it would only be $600 per month.  Of course we would need to add money to that to cover any property maintenance, vacancy in the other unit and the typical items that should be allotted for, so maybe she pays $800 or $850, with $200 or so going into account to cover those items, right? She plans to live there for no more than 2 years, at which point we can rent it out for more. 

I am investing $10,000 for down payment, initial repairs and a small emergency fund to start out with.  (When do I get that money back?) I have told her that this MUST be an investment for me because we are simply not in a position to be making a down payment on a house for my young daughter just to help her out and she, otherwise, would not even be buying a house by herself because she is not ready to take on that responsibility by herself. We need this money to start working for us, but we also want her payment to be as low as possible.

Please help with any ideas. Also, I'm in Texas. Do we need to set up an LLC in New Jersey? I need to find a tax person who can help us do this so that she can get the homestead exemption, but we can treat the other rental as a business. It seems very confusing to me and I need help! Thanks!