Renting Your Home To Family

I got a phone call today from a person wanting to know about real estate investing. In fact, she and her husband will probably read this post and know I am talking about them. 🙂

Anyway, the subject of buying a home and letting their mother live in it came up. Is that an investment rental property?

Maybe yes. Maybe no. The IRS, as I understand it, wouldn’t look too kindly on that situation. It’s not “arms length.” So if you are going to do something like that you had better check with your CPA first. One thing you could do is to make sure, and document, that your family member pays fair market rents for that housing unit.

Of course, if the IRS disallows the rental property as an investment you might be able to count it as a second home. Any thoughts chimed in here by CPAs would be most appreciated.