Finally- you can eliminate 95% of the troubles and risk by simply having professional and legal screening and management processes, so don't sleep on that piece. 

This increases the perceived risk and perhaps the legal fees to put in place and then defend if necessary. 

Do not rely on it for legal advice.

Here is a detailed look into this issue:https://www.biggerpockets.com/forums/51-tax-legal-issues-con...

If you need financial help, ask under the "Finance, Tax, and Legal" forum.

The issue is legally be allowed to raise rents and getting around what the city believes is fair market rents.

A duplex or triplex could be a solid first step.Get Legal AdviceTalk to a trusted attorney before agreeing to anything like a trust.

ADUs will be legal, by-right, state-wide starting in February.

At a bare bones minimum, the letter confirms the start/end dates of the lease, monthly rent, paid-through date, absence of any prepaid rent other than the current month, and security deposit amount.Better, it will include statements there are no unresolved claims or disputes or repair issues with the current landlord, and no verbal or written side agreements.Better yet, it will include a copy of the tenant's lease, and a confirmation the lease is a true and correct copy with no amendments.

Income Late fee Gross rent Expenses Advertising Cleaning Gardening/lawn mowing Insurance Interest on loan(s) property tax Legal expenses Pest control Property agent fees/commission Repairs and maintenance Water charges Electric Bill Total expenses Net rental income or (loss)