Taxes, Multi-Family Live-In, and LLC???

[Luke Johnson]

My wife and I bought our first property in June of 2021. We are househacking a triplex where we rent two units out and live in the 3rd unit while renovating. We are now looking to move on to our next property. 

A family member saw our success with the first property and wants to get into real estate with us under a LLC. He is attracted to the tax benefits of operating out of an LLC to offset a high W2 income. He also wants the liability coverage of an LLC instead of an umbrella policy. The basics of how we would operate our next property would be, he provides the capital for the down payment and we put in the sweat equity and maintenance. What I am curious about is what can be claimed when we go to do taxes if we purchase under an LLC and live in one of the units. I believe we could only claim the portion that we aren't living in but could the other member claim the whole property?

I'm also curious about the best type of financing for something along these lines?