And San Fran, San Diego are #2 and #3 respectively.

Give your parents the respect they deserve and be a good landlord regardless of who is living in your units.Also, some good points made by @Michele Fischer, as you may want to invest in modifications to make the unit more accessible for your parents as they age.

Furnishing would be done by myself at the beginning of the lease.After meeting with an owner, and explaining the opportunity along with my professional background and providing references, the owner could trust their property would be treated as I would treat one of my own properties, which is with the utmost respect. 

So, the basis would still be your adjusted basis, no step up to FMV.In general, the IRS doesn't respect "self-dealing", which is selling assets to yourself, a family member, or a company you control.These issues get complicated, which I love because I get to charge my time helping clients through these issues!  

@Kim Tucker Everyone is entitled to their opinion and I respect yours.

Have a wonderful weekend and let me know when a good time to speak is on Tuesday (I am good tomorrow BTW, but I wanted to be respectful to your's and other's Labor Day holiday).Alex

Many people here have advised against leveraging your equity, and I respectfully disagree.

@Kevin, While i value your opinion, i respectively disagree.

Did you enforce whatever consequences there may be when the first tenant was late, the first time.My best advice is you have to enforce the lease and make sure your manager is enforcing the lease too.It's your business, your investment, you need to respect it so other respect it too.

I say this with the upmost respect with your interest in mind.