A CPA familiar with real estate partnerships could clarify the implications for everyone involved.A great attorney or CPA can help you iron out the details and ensure the partnership benefits all parties fairly.

I have heard of a fair number of college students, particularly freshman who struggle to adjust to college and have to return home for mental health reasons.

As far as benefit to the seller goes, @Matthew Paul I think you are probably right on the money and regardless of whether they would have preferred to stay in this house rather than move, it is likely providing them some excellent cash flow; and I'd be hard-pressed to come up with a deal that serves both parties better than the current situation. 

There are plenty of STR-savvy CPAs who can help you navigate the rules, maximize tax benefits, and make sure everything is done right.

Option D: you are considered a "disqualified person" to your IRA and as such are prohibited from engaging in any transaction in an IRA or receiving any benefits from the IRA (directly or indirectly), therefore I strongly suggest you avoid this option if you wish to stay out of trouble. 

We found that two key factors significantly helped us succeed with our short-term rental (STR): using NightlyPricer instead of AirDNA and opting for Safely Insurance.NightlyPricer: Rather than relying on AirDNA, we chose Nightly Pricer, which provides more dynamic, real-time adjustments based on demand, local events, and market trends.

When the tide does shift, you'll be cruising on Easy Street while the others are still getting in the water, adjusting their goggles, and warming up their muscles.

Would love to hear your thoughts on whether pursuing this adjustment makes sense or if I should reconsider.For reference, I’ve included the following assumptions in my calculations:5% for maintenance3.5% for vacancy10% for capital expenditures and management feesThanks! 

You will lose one of the best benefits of the real estate industry, appreciation.

Just make sure to adjust the rent enough to cover the average utility costs and include it clearly in the lease terms.