@joelnobles being a co-signer on your sister's lease may factor into your debt to income ratio when qualifying for an FHA loan, This would be something to discuss with your mortgage broker.Best,Johnetta G.

Not sure what your credit score is though, so that may be the only factor.

@Andy RouschThere are so many factors involved, that it'd be tough to answer this question concretely.

Ideally, he would put up the money for the purchase and rehab costs, I’d run the project and then pay him back plus profit after selling it.

If I can find one with good cashflow, that would be ideal.

What I would find ideal is to partner with a contractor, use some of my funds and some of their funds (or their investor funds) to finance the build.

IMO if you chose #1 now you can always choose options #2 or #4 six months(maybe a year) down the road, pull all your 60K back out plus what ever appreciation you have(if any) and move forward. to me in option #3 you said paying interest bothers you and option 1 solves that problem, gives you practice with a new tenant so if they don't pay or u have problems you don't have 2 bills( your old mortgage and your new mortgage) to manage along with the stress(of kicking out your friend and finding a new tenant) just the one mortgage that your fiance already has within his budget(because your 60K didnt' factor into bank financing so you found a home to move to that was within his budget alone(even more safety net) or at least lower mortgage payment and house than if you had 60K to use to buy-down another home. but i digress....Option #1 is less stress , less interest payments,and less of your money with 2 options left over at a later date. like joe said your 60K is safely locked away in the home(minus depreciation) which you can always pull out later on when you are more risk-prove.Still your choice but that my point of view.Good luck!

Learning from those with experience would be so ideal.

As you mentioned in your post, the major thing to avoid is the eww factor (i.e. cut out the BS). 

Debt repayment is not factored into expenses there for paying down a mortgage,  as we all know, creates it's own income stream separate from that generated by the property itself.