House hacking partnership

[Libby Louer-Thompson]

How would you structure a deal to buy a duplex if one partner is planning to live in the duplex and the other partner lives out of the area. I am about $50k short on my pre-qual for a duplex that I would like to house hack. My sister offered to help out but we don’t know what that would look like. 

[Nick Scannell]

Quote from @Libby Louer-Thompson:

How would you structure a deal to buy a duplex if one partner is planning to live in the duplex and the other partner lives out of the area. I am about $50k short on my pre-qual for a duplex that I would like to house hack. My sister offered to help out but we don’t know what that would look like. 

I don't have experience with this, but I love problem solving. My guess on what would make the most sense is to act a both an investor and a tenant. Assuming all things are equal (downpayment wise), it makes sense for you to get an equal benefit of Rent Savings + cashflow to your sister getting in cashflow. Start by figuring out what 50/50 would be if neither of you lived in the unit and made market cashflow. Then, your sister should get that in cashflow and you should get yours in rent savings + cashflow.

Rough example: 

PITI + Expenses = 2500

Market Rents = $1500 each side ($3,000 total) 

Cashflow if neither of you were living in the house = $500

Your sister should get $250 a month, and you should get $250 in rent savings (You pay $1250 a month in rent as opposed to $1500). 

Would love feedback on my thoughts if you (or anyone else) has them!

[Ryan Thomson]

@Libby Louer-Thompson this is whatever you would want it to be. There is no right answer. 

Here are a couple of ways it could work:

1. Negotiate a monthly payment to your sister in exchange for taking on the risk of co-signing with you.

2. Give your sister some of the equity of the house in exchange for her tying up her ability to qualify for new credit by co-signing with you.