Renting a house from yourself to use as office space

[Luke Krause]

I just bought a new house but still have my old house. I also cancelled my small executive office space lease due to COVID-19. I am wondering if it makes sense for my business to rent my old house (from myself). The idea is to do a cash out refinance, invest the proceeds into a conservative stock/bond portfolio. Then I could pay myself rent of $42,000 per year and save 35% in income taxes since it will be deducted as a business expense. On the rental side I will be operating at just about breakeven before tax. But after deducting depreciation and interest expense I will actually have a positive after tax cash flow each year while paying down my loan.

Has anyone ever done this? Is this the right way to think about it? What else should I consider?