Brother B feels closing/ realtor costs should not be factored into (subtracted from) his split because the house would not actually be sold.

I would subtract this number from your 70% ARV and that should be your goal to purchase.

While ideal if house hacking can bring your monthly outflow to '$0', what you are really analyzing is, if I were to rent out the other side or other bedrooms, how much, in total could I collect each month and then subtract that from your total payment on that home.

For a BRRRR, I take the ARV*.75 then subtract estimated rehab costs.

I would verify their monthly income and then subtract the cost of the mortgage.

Also, in your example, you won't be able to contribute the entire $5K; you need to subtract half of the SE tax.

Also if they made capital improvements on the property, they can probably subtract those from their gain to lower their taxable amount, if they work with an accountant on it prior to selling.

They now want the current rent income to cover 1.2 times expenses after they subtract $1500 plus all property taxes and insurance.

(Subtracting any damage and any late fees.) 

They plan on subtracting to Home Depot however its yet to be scheduled and their suggesting to complete payment for the flooring.