Buying a home for mom.

[Tim L.]

So I currently have one rental property, and after accounting for all costs (PITI, HOA, vacancies, cap ex fund, etc.) I cash flow right around $300/month. Everything's fine and dandy with this deal, and I have no issues with it. It's been wonderful. However, my mom is currently renting a place a few hours away from me, and barely able to make ends meet each month (her rent is $800/month).

Doing a thought exercise this morning, I realized that if I were to sell my rental, I could net ~$70k in profit, which would be taxable as a capital gain. But if I instead (1031 exchange) purchased a small property closer to my house for $60k, put $10k into rehab, I could then rent it out to my mom for say $600-700/month. There are a couple of areas near here where these numbers could actually work, as long as I could get a good deal on the purchase price. 

At the end of the day, my mom would save $100-200/month, live closer to us, and have a place of her own where she could do whatever she wants with the yard, painting inside, etc. I would benefit in having slightly more cash flow on my one rental, and know that my mom is safe and sound in a place of her own.

Has anyone done something similar to this before? While I'm purely in the thought exercise mode right now, I'd like to delve a little deeper and explore how to structure a deal like this.