Purchase price: $264,000 Cash invested: $120,000 Sale price: $640,000 Duplex caught on Fire.

This concerns me when you state it is cash neutral because if your underwriting is like most newer RE investors it would mean you are cash negative.  

Leveraging your equity through a HELOC or cash-out refinance can be a smart move, but it depends on your risk tolerance and goals.

Additionally, as a co-owner, he would directly benefit from any appreciation, tax deductions, and profits from the property.On the downside, being on the loan could impact his credit score, especially if there are any missed payments or financial issues.

I purchase the properties as a non-occupant coborrower.  

If it doesn't get repaired, no matter who is responsible, the rent payments stop. 

What is your price range/down payment amount?

This may take the form of a second deed of trust if the funds are being used as a down payment on an investment property with a conventional loan.

Otherwise they would have sold, taken the tax free cash and moved on. 

However, I wouldn't recommend this approach as it could lead to big trouble and fines (up to $10,000 per non-compliant message).