Tax Treatment of Business Use MIL/Condo/etc

[Joseph Delia]

So I am self employed as a consultant in a business other than real estate (I also have some rental properties that I own and operate but I don't believe they are relevant to this question).  I bring in a decent revenue stream in that consulting business.  I work from home mostly, but also travel quite a bit (maybe a week per month).  My clients pretty much always reimburse my travel expenses. However, I'm starting to find that I travel to one particular client quite often, in a city on the opposite coast from which I live, and I'm super tired of the whole hotel scene and bringing suitcases with me all of the time.

I'm considering buying a property in that work city. Maybe buy a SFH with a MIL suite (or one where I can build a MIL suite). Then I'd likely try to live in the MIL but rent out the rest of the house (rent out 80% of the house in effect).

Here's my question:

My client would prefer to give me a lodging reimbursement or stipend regardless  (e.g., $1000/month), even if I was staying in a place I owned, as that scenario is much cheaper for them than reimbursing my hotels.  How do I arrange this so that there is as much of a win/win scenario here?

- Do I write them a bill for $1000/month that they reimburse for the MIL suite I'm using (i.e., instead of renting out that extra space and getting $1000 from a renter)?  If I do, do I then have to pay taxes on that $1000?  In the hotel scenario, I would get nothing that needed to be taxed, my client would wind up paying more, and the hotels would get a ton of money.  In this scenario I'm trying to solve for, we cut out the hotels.

- A variation of the above, could I rent the whole house out to a tenant and then rent back the MIL suite from them?

- Any other thoughts I should consider as options when problem solving this situation?

Thank you.