(all his risk) He is paying the builder (another brother) just like anyone pays a GC.When it's all said and done, they think they can sell the home for a profit, but they are not sure how to split up the profits, should the ratio be based on the percentages for example 23% to the father-in-law, and then 77% to him?

Welcome, @Michael GlotfeltySoCal can be a tough nut to crack for newbies.A couple years ago I mailed out lots of letters to homeowners in LA County with no luck.Then I tried rural Kern County and got a deal from a distressed homeowner in California City.The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.Also, have you considered an owner-occupied small multifamily for your first deal?

Not sure you'd be able to pull off an additional $1k profit on a three family while living in one of the units unless you take on roommates in the one you're living in. 

How are people paying so much and expecting to profit? 

So why is so hard to find one more JV or equity partner for such a lucrative and high profitable project? 

It also had their insurance of about $110 a month (gone now, $110 more profit). 

One great thing about real estate investing is that there are many different ways to make a profit and change your life. 

He gets a discount if he buys a lot or seconds or something but he keeps that as part of his profit.

Has anyone ever created a partnership with a vacant home owner where owner retains ownership of the property and the other person (me) acts as a property manager for renting and they split the profits.  

Any way they have suggested a 60/40 split on the profits.