With a 40-year mortgage, however, most of your payments go toward the interest, and almost nothing goes toward the principal balance.

As it reads, a pro-rata share is "equal to the Purchase Price of Participation divided by the Outstanding Principal Balance of the Note."

Becoming a LandlordYour house appreciating at 5% annually = $25K/year.Your parents' larger house = $30K/year.Financing the PlanTake out a mortgage on your house to buy your parents' house.If their mortgage rate is lower than today’s rates (6.75%), keep their mortgage and assume it.Why It WorksYour tenants pay the mortgage—not you.Each monthly payment includes ~$300 toward the principal.

You will also want to find out if payments are interest only or if some principal is built in.

Also, it's likely that a slightly smaller amount of each payment will go toward principal since the loan balance is higher and the rates are likely nearly the same once the MI of 0.5% is added to the rate.

Home mortgage is $3700/month and $500/month extra payment towards the principal.

@tom shallcross summarized this well in another post and just inflate your numbers up for a $665k purchase price and $2300/mo per unit for rent.Borrow 80% which is like $3700/mo for Principal, Interest, Taxes, and Insurance.

Principal mortgage balance is $159,531.

This is not the best way to invest in real estate as you lose out on principal pay down but it gets you instant income that you can make mostly passive by hiring out the property management.

that will not cash flow - you won't be generating "cash flow" from the property that will go beyond servicing the debt and allow you to pay down any principal.