Generally only compensatory damages that are for physical injury or physical sickness are excluded from taxable income by the code. 

GMI- $5200 Monthly overhead excluding mortgage principal and interest- $1905 $400k financed at 4% interest on a 30 year amortized note- $1910 P&ICash Flow= $1385 (this does not meet my criteria)This property is under value in rents, and owner pays water at the Six unit which cost $500/ month.

You can read the full bulletin here: https://guide.freddiemac.com/app/guide/bulletin/2019-15Some alternatives to Home Possible for house hacking....1) FHA always works for 2 units and is excluded from the self sufficiency rule.

@Kristin Kerr, under the Alabama Uniform Residential Landlord Tenant Act, a landlord is obligated to maintain all systems that were working at the time the lease was entered into, unless specifically excluded in the lease.

Personally I would exclude any amount that is directed to non-housing expenses.Lastly, they likely have 'safety' requirements that may result in changes to your home. 

Because it is an excluded transaction the transfer doesn't trigger the red flags a direct transfer into an LLC would flag.

Ask them what their current lot rent is and what else is included/excluded?

Hey @Jon Roes, the 50% rule for expenses, excluding P & I is generally a good rule of thumb.

Exclude debt service and capex from your expenses, your only looking at operating expenses.

You could transfer the property into the Land Trust (excluded transfer thanks to the St Germain Act, since the trust is considered an Inter Vivos Trust [estate planning tool]) and assign the LLC as a beneficiary.