As opposed to purchasing a house to rehab. 

As opposed to buying a house, as soon as you sign (or shortly thereafter) you own the property and the transaction is complete.

So I believe I qualify as a trader as opposed to an investor however I do have some long term investments.Income started with my job (I still work) and birthdays/holiday money.I think I'll wind up being a trader, securities though may be the grey area for my current situation though.

What are the pros and cons to this as opposed to renting to families? 

Fear driven as opposed to fact. 

@Alicia JohnsonThe answer is maybe, as you probably expected.As far as how hard it would be to prove - remember that the IRS requires a detailed time log, created as you go (as opposed to reconstruction during the audit).

I particularly like your advice about finding solid base hits, as opposed to home runs.

@Callum SinclairThis is a month-old post, so I'm probably late.The simplest and most effective setup is usually to keep the whole business under your name or an LLC that is 100% owned by you, and set up your family members as lenders, as opposed to partners.If funding the deal makes it impossible, due say to your credit, then you can reverse: have your dad own the property under his name or his LLC, and set yourself up as a contractor for him.Bottom line: it is case by case.

These types of posts are actually useful as opposed to unrealistic, aberration examples in which the poster is just showing off with some abnormally high return.

Then I'll pay back the HELOC as opposed to paying a traditional mortgage.