My father in law mentioned he would fund the down payment for the new construction loan, but hinted getting a cut of the cash flow every month.

@Patrick Eldridge - I have until 45 days AFTER closing to ID 1 or more props concurrent with 180 days from closing to purchase, but I have to at least submit some sort of "intent" BEFORE closing I assume (and I haven't even hinted at it yet).

You should be prepared before that conversation to say exactly what was done (obvious hint: bathrooms + kitchen matter more than anything). 

Our mortgage broker of course does not recommend this route but has hinted off the record that this might be the best option for us.Have any of you done this before and how did it go?

Another option that was hinted at above is taking out a LOC on the total equity.

A quick Google hints at a "broker-in-charge" in NC. 

Don't even hint that you favor / disfavor one of these or you risk big, expensive lawsuits.racecolorreligionnational originsexdisabilityfamilial statusSo bottom line, if it were me in your shoes, I'd 1) encourage him to find a new roommate/fiancé/whatever ASAP and 2) contact ex-fiancé and remind him/her to pay up or get sued.UPDATE: btw, a lease is a contract, so all parties must agree in writing to any changes. 

If your hinting at lying about owner occupying as a way to get a better interest rate or lower down payment, that is mortgage fraud.

Hint: 20 hours is a minimum for a starting out, part-time investor. 

Also, if you increase the rent to the maximum amount allowed sometimes renters will get the hint and leave on their own.