Looking to start buying rental properties

[Andy Hayes]

I'm a newbie to the idea of rental properties.

I've chosen an MSA where my 22 year old daughter lives as where I'd like to start buying rental properties. The vacancy rate is low and rents are moving up but there is also a decent supply of SS and REOs; the area has taken ~40% haircut from peak. I'm currently living in Tucson and wouldn't touch this market due to high vacancy rates and falling home prices.

As a long time renter (moved a lot and recognized a housing bubble in 2003), I like 3/2/2 SFR that isn't too dated. That's the type of properties I'd like to buy and rent out. I discussed with my daughter that she should buy a house (nurse with degree, zero debt) but she doesn't have enough saved to make that happen. As an alternative, I proposed buying a nice 3/2/2 that she and a couple of friends (also young medical professionals) could rent from me. I figured that this would be an excellent way for me to break into the rental business. My daughter's lease expires 1 September so I have plenty of time to consolidate my feces.

Here's my plan; please let me know if I'm doing anything wrong.
I plan on finding a house that both my daughter and her friends like.
I will put 20% down, including $10,000 from my IRA as a first time buyer. I will get a conventional 30 year loan for a primary residence, not as an investment property.
I will not write a formal lease. I will charge my daughter and her friends a below market rental rate - it would still have positive cash flow of several hundred dollars/month after PITI.
I will not treat the property as a rental for tax purposes - no writeoffs for anything outside of what an owner occupied home is entitled.
Once my daughter and her friends move out (probably 2-3 years down the line), I will convert the property to a legitimate rental property.

I think that this would be a good way for me to break into the headaches of being a landlord but am concerned that I may be pushing the ethical boundaries with respect to the mortgage, IRA funds, and tax treatment of the property. All comments and suggestions welcome, including those extremely critical of my proposed approach. If you have alternative suggestions, I'd love your inputs.
Thanks in advance.