My gut tells me you will have to "allocate" a portion of your sales price to the land and any improvement made more than 12 months before you sold and then allocate a portion to the buildings you put up within one year of selling.

State late stipulates that if it is exactly on property line the neighbor gets a say, and can also be billed for a portion of it, and taken to court if not paid. 

Is the entire lot the 12x100 strip or is that like a panhandle portion with the rest of neighbour A's lot accessible through his own property? 

However, I wanted to take it a step further and have me living in the basement (I really do not need much more than this) and have them rent out the upper portion.

Ultimately a house and garage for us, rental cabins for the investment portion. 

Mainly the initial portion to get the work started.

As the 80% portion gets paid down by your tenants, that recovered equity you will be able to borrow against in the future.

Maybe look at this setup: http://mpgroupcpa.com/post/3-tier-corporate-structure-real-estate-investors/@Jacob Perez was right on what it takes to get a mortgage, income, credit, the house and down payment.For rental units the banks consider 50% of the rental income as the portion that can count towards your income.As for credit, a cell phone on a contract and a credit card are great ways to build up credit fast.

Since he owns the property through an LLC, he is willing to allow me to buy equity into the partnership now with the $50k cash, with the option of purchasing another portion of the partnership next year.

He's looking to rent the home out and move in the near future.He's interested but highly apprehensive because he fears what the refinance portion will do to his DTI%.