I am curious what shape the house was when it was half-gifted to you because reading between the lines it seems like you squatted in the gift and didn't do any maintenance and don't really know anything about owning or maintaining a house.I also don't know why you want to get a rental and be a landlord when a house you got as a gift is a disaster.

Especially since it’s really an infinite year loan that’s 100% forgiven upon your death  like a $2.5M gift. 

A few additional context that may make this a bit more complicated:- ideally the 1031 exchange that I do will then add my wife to the picture with the trust that we have established (however it's easier to do)- the property was previously used as our primary property, but is now a rental property for at least 4-5 years- an alternative is the sibling is open to gift annually up to the gift limit so that we own the property outright prior to the exchange, but that will take quite a few more yearsThank you!

The more efficient solution might be to purchase from Grandma with the 25% down..you ca use the income to help qualify and obtain gift funds or other sources for the down payment.

If you do, you will get two gifts: free education for one of your friends and good karma for helping to grow the community.

They have offered to sell this place and gift us a portion for downpayment.

With family, you should consider just giving him a gift.

As someone else already mentioned, you cannot use gift funds for the down payment on a conventional investment property purchase.

In Gary Keller’s book, Shift, he lists 25 creative options that are most common, but barely scratch the surface:- Seller Contributions- Seller-Funded Permanent Buydown- Seller-Funded Temporary Buydown- Owner Financing- Contract For Deed- Seller Second Lease Option And Lease Purchase- Seller-Assisted Down Payment- Wraparound And Assumable Mortgage- Gift Funding- Selling And Refinancing Existing Assets- Non-Occupied Co-Borrowers- Using 401(K)- Temporary IRA Transfer- Pledged Asset Mortgage- Equity Transfer And Bridge Loan- Employer-Assisted Mortgage- Lender-Funded Buydown- Fannie Mae’s “My Community Mortgage”- Running Scenarios With Automated Underwriting Systems- Adjusting Amortization Period To Lower Payment- Adjusting Interest Rates To Cover Closing Costs- State, Province, And Local Grant Or Bond Programs- Mortgage Credit Certificate- Private LendingHe said these options barely scratch the surface.

Did you all have to record a Gift Deed in order to complete this process?