Rental Property for College Student Children
I'm wondering if anyone has done something like this, and what some potential legal issues would be. The scenario is my two daughters attending the same university. They are about 3 school grades apart, so there could be something like a 7 year period where at least one of them would live in a rental property that I buy and rent to them. My intent would be to manage it like a rental property, charging them "market rent", accounting for expenses, depreciation, etc. I don't think that experience is anything unusual.
Now, add in a potential to use distributions from a 529 plan to cover part of the rent. There is a certain amount that can be withdrawn from a 529 plan as a qualified distribution for student housing costs ("room and board" costs). Those costs are usually determined by the university itself, and as I understand it, are usually related to the cost of living on campus in a dorm.
So buy a property that your children live in, run the property as a rental, while taking some part of the 529 distribution that pays for tuition, fees, etc, to also pay a portion of the rent. Are there any obvious problems with that?