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My 85 yo dad and 65 yo stepmom live in a (fully paid for) 2 story home in South Bay area of Los Angeles. We've discussed them moving to a 1 story home while they are in good health, possibly taking advantage of the current lower price and mortgage rates. The problem is that with the poor real estate market, selling their 2 story home may be challenging. Also since neither are working, getting a mortgage may be iffy. They do own a small apartment complex from which they derive their main income but are hesitant to risk mortgaging it. Similarly, they hesitate to use up their liquid savings for the 1 story as then they would have no reserves.

I'm 55 yo and with my wife working full time (both living in GA), we're in the 33% federal tax bracket. Would it make sense for us to buy the 1 story home in LA and rent it to them for the mortgage deduction? They could in turn potentially remodel their outdated 2 story as a rental for some income.

If my parents want to contribute to the downpayment for the 1 story, how can we organize it so it's simplest (hopefully avoiding joint ownership)? One downside presumably is we'll have to file state income tax in CA (as well as GA). Are there other major pros and cons with this idea that I've not thought of yet? Welcome your critique.
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