Gifting equity in a house may be more trouble than it is worth if you are not near the life-time exclusion1) Potentially having to get the property appraised everytime an equity is gifted2) Having a title company update the title every time3) Exemption of the gift tax return is normally for cash gifts below the annual gift tax exclusion, you may still need to file if you gift non-cash4) If there is partial ownership over several years, having to properly pro-rate certain items such as real estate taxes, mortgage interest and rental income if the property is a rentalBest of luck 

You could structure the deal with seller financing to bridge the gap.Possible offer structure:-Purchase Price: $170K - closer to actual value-Down Payment: Low or zero down to conserve cash-Interest Rate: 3%-5% - or better yet, 0% if the seller will agree-Monthly Payments: Interest-only or deferred until the sale-Balloon Payment: Full payoff in two years when you sellIf he wants $200K, you can still make an offer of:-$170K purchase price + $30K as a second lien due at closing-Seller carries $170K at a low interest rateHe would feel closer to his number, but you still keep within reasonable investment limits.2.

Most hard money lenders require 10-20% down payment of the purchase price or total project cost.Holding Costs During Rehab: Yes, you'll need to cover carrying costs, including hard money interest, utilities, taxes, and insurance.

I refinanced it into a  5% 30-year mortgage with a local bank as the seller would only carry the loan for a year.

The poster was asking about broken/damaged household items and guests destroying a rental. 

If they are the one providing most of the cash, they might not want to carry that liability, but you've already negotiated with your partners on this and then the bank isn't cool with it, you could be in a pickle.

Its great that the seller is will to carry a note in a seller 2nd as well, that will help reduce your require monthly payment with the right lenders.

@Joel Florek will your bank let you get cash out at closing even if the seller is carrying a note? 

This will give you one critical piece of information, that it may take X days to get an offer and sell, and the second item will give you what your competition is right now.

Simply put, we start off with the As Repaired/Completed Value (ARV), then subtract from that number a reasonable profit, the rehab cost (scope of work), which we've gotten good at, a contingency reserve for any "unexpecteds", our cost of capital/carrying costs (interest and costs of the leverage used), and our costs/fees on the buy and sell sides of a flip.