1031 Exchange LLC member lease back

[Reagan Ho]

We have a 3 member LLC and we are selling a vacant 6 unit residential apartment building and we would like to exchange it for a house. We own the apartment building free and clear and we will be using a commercial loan to purchase the new house under the same LLC. The new house will cost more than double the apartment building.

One of the members of the LLC wants to live in that new house and can pay a "rent" if needed but we would prefer to just pay the note without charging that member to live there. Is this legal? Do we need to keep any type of "rent" paper trail for the new house?