LLC Rent back to member - Is this legit?

[Bryan Petrinec]

I am in a partnership with my father and brother in a parent LLC that then has property LLC's under it. My father is down sizing and is in the process of buying a new home as his place of residence. Although we only have duplexes at this time in our LLC, is there any benefit to putting his new home in the LLC and have a rental agreement with my father?

On the surface, I feel like this is dodgy, but I cannot find any legal reason not to do this.  Would the mortgage of the new property need to be from another member or is it okay that he is also the mortgagee?  I feel like there is circular logic going on here, so help from the BP community is appreciated.  Before you all tell me to talk to a lawyer, if this is not flawed on the surface or illegal, I intend to do that next.

Some of the reasons why we are thinking about this is that my father is elderly, but still in good health.  That said, the 30 year mortgage will probably out live him.  And if he gets to the point where he will need to go somewhere for living assistance, we want the ability to rent out the house without any issues.  

His rent would only be the cost of PITI, so this would not be generating income, yet it would provide additional write offs. What am I missing??