I would appreciate any feedback or thoughts from the BP community on the following scenario that I am thinking about discussing with my younger sister. Has anyone out there ever done this or thought about doing this?
She and her husband currently rent an apartment and will begin looking for a single family home to purchase next year. I have been thinking about the idea of purchasing a duplex with them. In my preliminary thoughts of this scenario we would split it 50/50: we would be 50/50 partners in the ownership stake, and split the down payment 50/50. The benefits to them: it will allow them to live there for no/reduced monthly payment AND they would only have to put down half as much for a down payment that they normally would AND it would get them into the real estate investing game with someone who has experience. The benefit to me: it will allow me to invest in a rental property utilizing a low down payment first time homebuyer loan AND I would have someone on-site for simple property management calls.
Context about my current REI situation: I currently own two rental properties (a single family home and a condominium) as well as own my residence, a single family home. For all my properties, I've only ever used conventional, 30-year, 20%-25% down mortgages. I am trying to conceive of a low out-of-pocket scenario to get into a third rental and see scenario as a potential opportunity.
My biggest question is how would the cash flow have to be structured? I am thinking that my sister and her husband would still have to pay something that feels like “rent” into some combined pool/account for the cash flow to work out properly. In a traditional house hack, they would live for no/reduced monthly payment. But in this partnership scenario, I need to be seeing the cash flow benefit, too. Not sure how to make that work out.
Any thoughts?
Thanks!
--Ryan
