Personally, I think you need to subtract the demo costs from the cost of the land since that is money that has to be spent to make it usable.

As it stands my numbers come out to be:299,200 FMV179,000 60% FMV333,000 ARV233,000 70%200,000 60%293,500 (subtract 40k from ARV for suspected rehab costs as stated in http://www.biggerpockets.com/articles/863-the-basics-of-wholesaling-for-beginners)Assuming he is willing to sell, this seems like a potential good deal for me.

That out of the way, the fair way to do it if you're going in 50/50: buy the property, figure out the fair market value rent for each unit plus associated costs, tenant(s)+brother pays FMV rent, subtract costs, return 1/2 of monthly profit back to brother.

Our office just sold an 800 sq ft "investor special" for $182,000 cash in 6 days ($223 /sq ft), so our numbers won't help, but you see the idea.Also, most investor will subtract the cost of the repairs plus profit plus time from the ARV. 

Add/subtract your active income. 

You can also opt to not pay the utilities, in which case the housing agency will subtract the expected utilities amount from the Maximum affordability amount to determine how much rent is affordable/approved. 

I know the 70% rule and then subtract rehab costs, but have never heard anything about this aspect of doing the numbers and if it actually matters.

If you subtract my cost from the medium gross rents I have a Net Profit of $24,000 a year minimum.

So you can add for the room, but then I subtract for the garage. 

If a unit in a multifamily apt building costs 10K to rehab, do we subtract that from quarterly profits to investors?