How to use another person's money for a down payment?

Question

Hello,

I am looking to purchase a 3 unit rental.  A family member currently lives in one of the units and the seller has no mortgage on the property, but is elderly and ill.  I have excellent credit and a debt to income ratio of 18%, before taking into account any loans on this property.  I do not have cash for the 30% down payment required by the bank.

Another individual has expressed interest in covering the down payment, for a modest return on his money.  My problem is that the bank has stated that the down payment money must come from my own personal funds.

Do I have any options to take advantage of this other person's offer to help with the down payment?  I am uneducated (but learning) about how this all works, and would appreciate any advice on how I may be able to structure this deal.

Even if there is nothing that I can do right now for this property, I have already modified my budget and starting putting money away for a down payment in the future.  Exploring this site has gotten me interested in real estate and the potential to build a much better retirement fund than my current 401k, that has been steadily losing money for the past year.

Thanks!

JD Martin · Answer

You draw up a separate contract with said family member/individual for a return on the money at X percent, and the family member/individual "gifts" you the cash. If it's a big problem for your bank, you deposit it into another bank with your name on the account, then transfer from that bank to your bank so the funds are coming from your name.