Purchase of Investment Property to Rent to Adult Child

[Roseann Stevens]

I am in the process of purchasing a single family house for my daughter and grandson to rent.  I am putting 20% down and financing the rest as an investment property.  Our intention is she will build her credit and save money for the down payment and closing costs to purchase the house from me in two years.  At that time I may consider utilizing an IRS 1031 exchange to purchase another property, repeating the process to help my son.  In both cases they are responsible, employed adults but have unique situations that prevent them from qualifying for mortgages.  My daughter is going through a divorce and has recently reentered the workforce.  My son is self employed.  Neither of them have debts and they both have very good credit scores.  I’m not expecting to profit from this scenario and I want everything to be done 100% according to tax law.  I’m educating myself on IRS 1031 and will certainly be consulting a real estate attorney.  Has anyone had experience with this kind of venture?