Help Me Structure a REal Estate Deal with My parents - Buyout/Exit strategy

[fbohn1]

Hi all, this is my first time posting - I read the site multiple times a week and love all the info.

(TL,DR) Searching for an exit strategy/buyout options on real estate investment involving 2 couples - each with kids as heirs.

I'm hoping someone here has a similar scenario, or can provide some input to this deal. Mainly the question from me, the wife, and my parents are - what is the exit strategy/buyout? To be clear, there is no tension involved with this at all - we're just all trying to determine the best outcome for us the investors, and the kids as heirs.
Here are the parameters, already agreed upon numbers:

• I found a multi-family unit I would like to buy, and it will cash flow at about 80% occupancy.
• I don't have enough for down-payment + closing costs, however my folks do. They are not current investors - all they would do with this sum of money is put it towards their current mortgage balance.
• Folks go in for 75%, me & wife in for 25% of DP + Closing. My father is willing to go in based on the fact that he expects my mother to live a very long time, and would like to provide some extra monthly cash flow for her.
• Positive cash flow will be put into LLC bank account until we have (an already agreed upon) $XX in for repairs, capex, etc.
• Once bank account balance is satisfied, we will split positive cash flow 75/25 until we have both recouped our initial investment - this allows us to be both paid back simultaneously.
• After we have recouped initial investment - we will be 50/50 owners - split cash flow/expenses 50/50.

Here's where we get stuck:

• I have a younger sister, and two half-siblings.
• My wife and I have a daughter (who has special needs), and another little one on the way.
• If either set of us (both my parents/ both the wife & I) were to pass somewhere along the way, where do the children/heirs fit into this at all?

Obviously there are various points in time where this could happen:

• 1 year in, while still funding reserve account + mortgage payment
• While paying ourselves back + mortgage payment
• Cash flowing with mortgage balance
• cash flowing free and clear

Both sets of us feel like our kids should be entitled to some portion of this investment should something happen to one set of parents.

Working backwards:
Is there a point in time where you say, you've both made your money back and no buyout/exit is necessary? i.e. both couples have split 50/50 profits for 10 years AFTER the loan was paid off? Do you do a 50% buyout if one couple wants out upon immediately paying off the loan?
If you're willing to do buyout at 50%, do the kids assume 50% ownership should one couple pass while there is still a loan balance, in which the kids assume some liability?
When and where do you choose to give 100% ownership to the lone surviving couple?

Sorry for the long post - just trying to lay out all the info I can right now - thanks for any input

 

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