BiggerPockets

If you're going to use his credit (income, really), he will certainly be on the mortgage.

What if he wants to buy a house or something on his own?

What if this deal goes south and damages his credit rating?

Do you want to continue to be friendly at family gatherings? If so, I'd find someone else. Or, just wait until you have income.

For all practical purposes, he's the "money partner" in this deal. The usual split is 50% of the profits to the money partner.

If you can get him to accept 20%, good for you. I'm just telling you the normal split when one person does all the work and the other puts up all the money (which is what your brother is doing), is for the money guy to get the 50% of all profits. Why? Because the money guy has numerous opportunities to invest their money.

If you're going to buy and hold, read in the Rental Property forum about the 50% rule (expenses are 50% of rent) if you want to avoid your deal going south.

Buy and hold is not a short term money maker. If you do things really well you might clear $100 a month. You really need to have some cash in hand to handle the problems that inevitably crop up. For example, a tenant just bugged out on Friday. No rent for April. I'll have to pay utilities. I have to have the carpet cleaned. I'll still have the payment with the taxes and insurance. I have to deal with showing the property and screening the new tenant. Yes, I have a deposit, but it doesn't cover the lost rent and other expenses.

Sounds like you're going to be doing hard money. Keep in mind you'll have to hold it for a while, paying the hard money interest. You and your brother will have to refi. That may take some time and will have expenses. They will want to see your brothers DTI, and may not count the rental income. So, be sure he has enough income to qualify for the loan even without the income from the rental.

If you buy a REO for $45K, it will be difficult to get a mortgage for $75K. You will need to use hard money. The ARV (after repair value) would need to be at least $110K, maybe even more if the lender's in FL have a lower LTV (loan to value) cutoff. Interest rates and points will be painful.

So, if you could find a property worth $120K, and a lender who will do 70% LTV based on ARV, you would be able to borrow $84K. Assume they charge 4 points and 15% interest. Assume about 2% for closing costs. So, after subtracting out the points ($3300) and closing costs ($1500, just rough estimates), and paying the $45K purchase price, you would have about $34K. Typically you will not get this at closing, or will only get a small portion. As you do the work, the lender will give you "draws" of the rehab money.

You will probably need to make monthly interest payments to the lender.

Once you have it fixed up and rented, you can refinance with a permanent loan. Your credit is largely irrelevant, since its your brother who has the income and is qualifying for the loan. DTI is debt to income, which is his total debt payments (the new loan and all his existing ones such as his house, cars, credit cards, student loans, etc.) divided by his gross monthly income. He may or may not be able to include the rental income as part of the income. Just depends on the lender. The DTI limit will also vary by lender. Do the math. If this is 30%, with the new loan, you should be fine. If this is 60%, he won't get a loan.

The lender may also want to see reserves. Fannie Mae's guideline is now six months PITI payments (plus any HOA fees or other fees) for the new loan, plus two months for any other real estate loans. That's for propertys 2-4. Over four you need six months for all properties.

You may need to wait six months or so before you can complete the refinance. You might find a lender who would do 75% of a new value, 70% will be easier. Keep in mind I don't really know your market, so the situation could be better or worse.