Plus, there would be no need to will the house to you & your siblings.

Additionally, the deed of the house is in his father's name (now deceased) and it was inherited by the son (who I'm calling the owner, and who lives there) and his two siblings.

Richard, i think that is a great thing to do for your parents and is a good plan. if you have any siblings, just make sure you get everything in writing about the deal and that you will pay off the debt in the mean time and that it will be yours, just to avoid any future arguments. 

He only had one child, the rest were siblings, etc.

Both parents are dead now and the house is held in a living trust that I am co-trustee of with one other sibling.

However, he said he'll have to gather his other siblings as well.

The head of the estate had to fight in court at the time because of a dispute among the siblings at that time.

Are these non arms length transactions, selling to siblings and cousins or questionable deals?

I have 3 siblings and together we are investing in houses in the Tyler, Texas area. 

Conceivably, these siblings would either list and sell the asset to your investor (for which you receive commission #1) or you bring in a developer/syndicator.In the second scenario, siblings would partner up and contribute their equity into the formal or informal partnership and the developer/syndicator would bring experience (successful track record), and other resources including builders, design architects, engineers, and entitlement experts for zoning and building approval, depending in the scale of the project.A third choice exists whereby siblings attempt development themselves.