Family & Friends Transaction - Please Help!

[Chris Zarro]

Hi all; first time poster so I apologize for any faux pas.

Basically there is a family house that is being inherited by two siblings. I would like to buy out Sibling #2 who would like to get a lump sum. We are all close and want to do what's in everyone's best interest.

The house is currently worth 400k and was previously owned outright in an irrevocable trust for about 15 years. Siblings #1 and #2 were the sole trustees and beneficiaries of the trust. Since the original owner (and grantor of the trust) has passed, the trust is being terminated. Getting the house out of the trust seems very straight forward and should be finalized soon.

My main question is what is the best way to proceed? My thought process is that Sibling #1 and I get an investment loan/mortgage and buy the house for 200k + closing costs from Sibling #1 & #2 (Sibling #1 is on both sides of the transaction). Sibling #1 and I pay no money down. They are amenable to this.

Without getting into specifics the property cash-flows when rented (assuming a 200k + closing costs mortgage at investment loan rates) and requires minimal upfront cost to get ready to rent. I am mainly interested in the best way for Sibling #1 and I to structure this loan/transaction. Sibling #1 is older and has no immediate need for the money. They are interested in keeping the house in the family and are fine with me making them whole at a later date. Their main concern is minimizing personal liability from renters suing, etc. They've discussed possible setting up an LLC, C-Corp, or S-Corp.

I am younger and have two personal investment properties already as well as a full-time, well-paying job. Sibling #1 has no investment properties, plenty of retirement savings, and owns their house outright with their spouse.

I'm looking for any and all feedback. Sibling #1 has been good to me and I want to make sure we do this in the best way possible. Please let me know if I need to provide any additional information.

Thanks!