House hacking in Northern VA; Advise and reality check needed.

[Brian Noel]

Hello all, I've been casually researching a variety of investing methods over the last year and see the "House Hacking" strategy as perhaps the most useful and lucrative strategy I can implement in my current situation. As I'm trying to help my family Move out of their dingy mold-infested rental that their current landlord is neglecting, as well as kicking off my Real Estate Investing portfolio.

Just checking to see the viability of such a strategy and getting some more experienced eyes on this plan I'm concocting. 

Here's the birds-eye view

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-20k in cash

-720 Credit Score; (my wife is 680)

-Currently paying 1700/month on a rental

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Our Family which we want to assist, and in turn have them assist us.

-No debt, (however also no savings whatsoever)

-Parents; Low credit scores (have increased from 500 to 620 and eliminated their debt through my planning assistance. (I refuse to give money/equity) 

-Both parents are currently furloughed and are collecting Unemployment (they average roughly 2500/month doing so, both are confident they can get back to work whenever they want and are simply taking advantage of the "free vacation"

-They are currently paying 1900/month for their rental.

-A brother and sister who have both graduated high school this year (my parents were getting ready to kick them out of their rental, and are part of what inspired me to do this.) both attending Community College but are not taking on debt (my advice) and both work part-time and average about 1000 a month after taxes. 

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My Plan:

After taking the first-time homebuyers course offered by VHDA, I realized I can comfortably afford a home in 350k-600k range, This would allow me to secure an SFH within 30-45 minute commute that would comfortably fit all of us. (I'd prefer a MFH but that seems rare in this area, and the wife is not a big fan of that so trying to keep her happy. (I'm more comfortable spending 300-400k but from my understanding shelling out more for a better neighborhood could benefit my rental margins in the future.)

-I'd rent the Basement unit to my parents for 1100 a month

-My brother and sister would each rent 350 from me (with an understanding that once they hit 24 they're welcome to stay but I can nor want to list them as dependants at that point and would charge them the market rate of 700 each

-Me and my wife would pay the remaining Mortgage and Utilities; thus lowering our current monthly expenses while also paying into our own wealth as opposed to somebody else's.

Now my hangups are mostly revolving around the tax implications of business and personal use.

See I thought this would be great because we could refurbish the areas my family is living in and take that as a tax deduction, as well as take advantage of the various VHDA loan programs available, such as DPA and MCC. However, after reviewing the guideline files its seems that if 15% or more of the property is used for business, the loan cannot be originated with DPA and MCC; I assume this applies to this strategy then? Because over 75% of the property is being rented out, and I assume I need to report that as income. Also is it really necessary for my brother and sister to become my dependents? I'd like for them to establish themselves, and be responsible for their own tax situations, but from my current understanding I cannot charge only 350 a month since that is far below the market rate, and therefore falls under personal use. 

I'm ok with missing out on those benefits but want to be sure I'm not missing out on anything that could be of use. 

Any other insights or considerations I might be missing would be greatly appreciated. Thank you for taking the time to read this post. I know it's an incredibly long one