Currently, my wife and I are renting a home from my brother at a discounted (just over his mortgage) rate of $1000 per month. He wanted to buy the home across the street but didn't end up getting the financing on his credit because he has too many other rentals. He asked if we wanted to partner with him on the deal so we could have ownership in a home and he could still gain another (part-owned) property. We really like it and would rather live there and although we weren't planning on buying for a few years, we like the idea of paying (roughly) the same and owning instead, without putting up a down-payment (we would rather pay down student debt and other loans first).
He offered to pay the down-payment and we would get the financing. I got approved for an FHA loan with a 3.5% down-payment. We’re buying the home right over $200,000 so that means he will only need to put down (as a ‘gift’) roughly $7000. While he’s willing to pay more than that, I think the overall rate of return would diminish, so this seems most wise. We’ll get the financing and planned to pay the mortgage and all of the utilities and such since we’re living there, but he also offered to pay some of the mortgage if needed to make it fair.
At what percentage would you suggest splitting ownership and future expenses? Typically a cash/financing partnership would be 50/50, but since it’s only a 3.5% down-payment instead of 20% is that still fair? Also, we’re getting the benefit of living there so shouldn’t we have to pay more? Would a 75/25% split be better? Or, are there things we can do (have him pay some of the mortgage) to offset costs and still keep a 50/50% deal (which is what I would prefer)? I would love some unbiased opinions on how to structure the deal. We plan to talk to a CPA and maybe a real estate attorney first and put everything in writing, but I wanted to survey unbiased individuals (Solomon the wise) to help us decide how to split this baby. We both feel like we’re helping the other out (because we are), even though we could both probably find cheaper alternatives to do the deal on our own.