They can only claim the §121 exclusion if the property is titled in their personal names or a disregarded single-member LLC, not an S-Corp or multi-member LLC.

Quote from @Steven Hervey: Hey everyone,We are renting our first property and were approached today about renting it out as a palliative adult care home. 

If your zoning or building code limits unrelated adults, that limit still applies.

If the guy's solid and has been in for several years, I'm a lot more comfortable than I am with someone who started this year -- then it starts looking like a shell game.Every adult must be on the lease, and each must pass your screening tests, and each must be responsible for the entire rent.

But the spouse/partner isn’t screened by anyone, and that is where most landlords get burned.Here’s how most experienced MTR owners handle it, and what I’ve seen work best:Screen them as a household, not just the nurse.If two adults are living in your property, they’re both legally responsible for rent and for whatever happens inside the unit.

If that ends up being the case,  you still have the opportunity also to do a 1031 exchange and defer any tax left over from the primary residence exclusion and reinvest it into another investment property.

So, yes, that would reduce the amount of property eligible for the $250K exclusion. 

The challenge is that the downstairs tenant currently has exclusive access to both the garage and backyard via their original lease agreement.As a family, we’d need a reliable parking space and a place for our dog to play.After reviewing public records, I saw that the lower unit was permitted in 2011.

Quote from @Ronald Ho: I found a multifamily owner that wants to sell his property off market but doesnt want to sign an exclusive listing with any agents.

Even though the nurse is already vetted through their agency, I still run standard checks on any adult who will be living in the home—mainly a background check for safety and basic income verification if they’ll be contributing.If the nurse’s contract alone easily meets the income requirement, I don’t stress too much about the spouse’s finances, but I still verify who they are since they’ll be occupying the property.