My humble advice to anyone attempting to do creative finance is:Creative finance is for experienced investors who have access to capital if anything goes wrong.Learn the lawsDon't use a contract "off the internet", laws vary by state and are also regulated on a federal levelLearn the financing techniques correctlyDon’t skip parts of the processDon’t ever do a “kitchen table” closingUse the proper deedAn attorney can help you with the legal work, but the rest you are on your ownYour guru will not bail you out“Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad planKnow what problems can ariseLearn the responses and solutions to problems before they are neededKnow everything there is to know about Title and what that meansKnow who a "protected class" individual isLearn the "back doors"Learn human natureUnderstand timelinesUnderstand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonmentThe court doesn't accept "I didn't know" for an answer"Know that the source of the lead plays a serious role in some states and federallyKnow how much of a "profit" pushes the boundaries to invite an investigationYou can be sued by the seller if you don’t do things correctlyYou are automatically at fault if an investigator or attorney or regulator gets involved.

I understand the safest option is to have a lawyer review the lease, but I figured I'd try to answer my beginner questions here and not waste the lawyers time (and my money) on the "for dummies" explanation.Thank you!

The ultimate answer is no (and I'm not a tax accountant).

Your answer needs to make sense, and be true.Also refi'ing your current primary into an investment loan also has the potential to be fraudulent if your family still occupies it as their primary. 

Based on a quick answer from Perplexity it seems like there would be no issue with you buying the home and collecting passive income, but you may not be allowed to manage it yourself since that is considered active work.

I've been on both sides of a househack (investor and lender) so feel free to reach out, happy to answer questions on that. 

Quote from @Jaycee Greene: Quote from @Jamie Parker: @David Mares The short answer is to build and develop the area.

Eric, I hope that wasn't too simple of an answer. 

If people took the five minutes to complete it they would not need to be asking and searching the internet for their answers. 

So first, I'll answer your question then I'll tell you what I would do if that matters or you care.1) I don't see a need to choose one or the other.