House Hacking off our portfolio

[Tim Grillot]

Typically house-hacking is considered living in one of your units that is part of a multifamily or a roommate situation and letting others rent absorb your living expenses. We have a small portfolio of rentals including a triplex, two duplexes, and two single family homes. One of our nice little 3/2 single family homes is going to be available shortly. We are considering selling our primary residence (5/3 on 20 acres) and downsizing into the 3/2 on a half acre that is part of our LLC. Downsizing is for sure a good thing for us as the big house is just a bunch of wasted space for us and our lives have shifted to where we don't get to enjoy our park-like 20 acres like we used to. This would also open up a bit of cash (equity) from the sale of our home, and drastically lowered monthly expenses (3k month) to expand our portfolio. The rest of our portfolio cash flows plenty to cover the cost of the 3/2 we would be looking at moving into. Are there any legal or other downsides to doing something like this? Would we need to pay rent to ourselves?