Dominic,All else being equal, from an insurance standpoint you may want to deal with a General Contractor. 

So, how does $390k minus $225k equal $50k in equity?

It would be easier and simpler if both contributed equally and jointly, such as financial and work.

The note owed back to you is equal to cash plus lot's value.

Not all are created equal.

They will then give my sister an equal amount of cash so she can purchase her first house. 

Hey @Matt Granzow,5% Vacancy is fine for residential in Milwaukee, shouldn't be an issue to equal or beat that number.  

But as you underwrite deals, you will always be able to hold the basic structure in your mind, then work the details on each deal in a spreadsheet that you can easily build yourself.Basic rental income and expense summary:Rental Income from all units, also called Gross IncomeLess Vacancy Factor (typically 5%)Equals Gross Adjusted or Effective Gross Income (has various names, but this is what I call it)Less Operating Expenses and ReservesEquals Net Operating IncomeThis fundamental formula applies to all income producing properties, apartments, office, retail, self-storage, etc.

Additionally, while I do understand the concern of renting to friends, I hear examples of awful scenarios and an equal number of great ones.

Without seeing a Profit and Loss Sheet, I am going to guess at gross monthly income 192 units X 50% occupancy X $45 Average Monthly Rental equals $4320.Assuming $50K down payment, financing $275,000 for 20 years at 8% would be a payment of 2,300.Guessing at Property Tax is $3600 per year, or $300 per monthGuessing at Insurance at $3600 per year, or $300 per monthGuessing at Property Management at 10% or $500 per monthGuessing at Repair costs of $150K,So some quick estimates on potential Cash Flow before repairs looks like:$4320 gross income - $2300 Mortgage, - $300 Property Tax.- $300 Insurance- $500 Property Management. - $300 UtilitiesSo a rough cash flow of $620 per month, $7440 per year, so the CoC return with $50,000 down payment and $10,000 in closing costs, and start up costs, looks like about $12.4%.If $150,000 in Repairs, Fencing, Lighting and Signage increased the Occupancy Rage and Average Rent, I think the numbers might look like: 192 units X 85% occupancy X $55 Average Monthly Rental would equal gross monthly income $8976$425,000 for 20 years at 8% would be a payment of $4062So a potential Cashflow would be $8976 gross income - $4062 Mortgage, - $300 Property Tax.- $300 Insurance- $500 Property Management. - $300 UtilitiesEquals a monthly Cash flow of $3514, or yearly return of $42,168.