BiggerPockets

This has "bad idea" written all over it.

First you say this is recreational/retirement property. Then you talk about sharing rental income. You mention it will rent for several weeks a year. Without knowing any numbers, I'd hazard a guess there will be no net rental income. You may collect a little rent, and it may offset a bit of the mortgage payments and expenses, but there's not going to be any profit.

Its tough to truly make a profit on any rental property. "Nice properties", and this one sounds nice (my wife would love a lake house), typically make really bad rentals because the price to rent ratio is out of whack. Vacation rentals do have higher rents than long term, but they also have higher expenses since the agents that do this charge much higher rates and you have to keep it furnished. Maybe you will manage it yourself (if allowed, some localities requires special licenses for this sort of rental), but it will take work on your part.

If you use a rental property more than 14 nights a year (IIRC) you lose the "rental property" treatment. More specifically, you lose the depreciation deduction, which is typically the source of the "tax advantage". That advantage is much more limited than you will be told by people who have a vested interest in buying property, so be sure to have a chat with your CPA about this topic before you jump in.

It sound like you like this place and can afford it, and that any rent coming in would just be gravy. Great, move ahead. Just don't expect there are any real tax advantages or that there will be any net income.

So, how do you fit the folks into the picture. I wouldn't try to make them a partner in this deal. Partnerships are messy at the best of times. Partnerships with family can result in strained Christmas dinners. I assume you don't want that. This is a complex partnership because both of you want to use the property, but only you will be on the deed and paying the mortgage.

It doesn't sound like you need their contribution to buy this place. If not, why not just be the good children I'm sure you are and just let them use it for free? My wife and I own a house next to my mother-in-law's house, and we let any of the family who wants use it for free. Well, we have them contribute to the utilities, sometimes. But it costs us nothing and maybe encourages them to visit mom a little more.

If that doesn't fly, how about having them loan you some money, then offsetting the payments with the use of the property. For example, say they loan you $50K that you use toward the property, and you agree on an interest rate of 8% (that's their return on this deal.) Say the place normally rents for $300 a night, but you make the rate for them $150. Daily interest on the loan is $10.95. Every six months they go and stay two weeks. After six months, the accumulated interest would be $2000. 14 nights in the place would have a value of $2100 (14*$150). Their use of the property covers the $2000 interest plus $100 toward principle. That keeps the deal much cleaner than trying to set up a partnership.

Never ever bring in family members as partners my mother and father got into a partnership with my aunt(my mothers sister)with a property in Arizona and that deal went sour really quick to the point it split my mother from her folks and her sister apart.

I have worked with my parents before and It went fine. Just make sure everyone knows their job and the risks.

Yeah, understand. My folks run a business together. It works, though there are more than a few harsh words involved.

But this one seems especially tricky. The parents want to buy into the deal. Whether they're on title or not, that gives them some ownership. What happens if some major repair is needed? Who pays? What happens if plans change in five years and the property can be sold at a nice profit? How does that get split? What if both couples want to use the property at the same time? I'm sure this can all be sorted out, but it needs to be discussed ahead of time.

It sounds like Larry doesn't need their assistance to buy it. If its totally his, and he lets the parents use it when they want, the use is a gift. No questions about extra costs, profit split or anything else.