Come up with terms (Down Payment, Interest Rate, and Amortization Schedule) such as a 5% Down Payment, a 6% Interest Rate, and 30 Year Amortization Schedule.

is that a combination of larger down payments + paydown over the past few years? 

Simply gifting him half the property now wouldn’t immediately allow him to claim the exclusion without fulfilling this residency requirement, I don't believe.One thought would be to use a HELOC to pull just enough equity out of the current home and use it to buy a smaller home, or at least the down payment.

Make that rent payment out to you and pick up a roommate.

Your $80K HELOC can serve as the down payment, as most lenders require 20%-25% of total project costs upfront.

I’ve had to widen my search radius to smaller suburbs or target properties needing light cosmetic work to make the numbers work.Value-add opportunities: Adding amenities tenants love, like finished basements or upgraded kitchens, seems to justify rent premiums in this market.Navigating the competition:Be creative with financing: Seller financing or partnering with other investors has been helpful to secure deals when conventional offers didn’t cut it.Work with local agents and wholesalers: They often have their finger on the pulse of off-market opportunities, which is critical in a hot market.For those new to suburban Chicago investing, I’d say the key is finding the “sweet spot” neighborhoods—ones on the rise but not yet maxed out in price.

I am leaning towards that you should house hack if you're monthly payment and accounting for capex/opex/reserves make sense.

The plan is not clear, but hopefully there will be payments directly to landlords. 

You'll likely need a higher down payment if you can find anyone willing to finance something like this as a first time investor; many require some level of rehab experience at the very least.

Honestly is better spent as a down payment on a second building.