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Best way to buy house that my sister owns that my parents live in and her to buy a house I own

Ok sorry in advance this is a little long, but wanted to provide as much information to get the correct feedback. Thanks in advance!

Here is my scenario.

I own a house (Crest Dr) with a mortgage of around $110k.

My sister owns a house (Kip Ln) with a mortgage of around 115k.

My sister moved into the Crest Dr house in Jan 2020. My sister moved out of the Kip house after she got married but our parents still live in the Kip house. I live in another house that I own.

Our plan was for my sister and I to basically buy each other's houses (Crest Dr and Kip Ln). My parents would continue to live in the Kip Ln house. Right now, I still pay the mortgage on the Crest Dr house and she continues to pay the mortgage on the Kip Ln house. We would basically buy the homes for what is owed on it (my sister would pay the higher amount)

I would like to buy the Kip Ln house where my parents live but buy it not as an investment property so that I can get the best interest rate and to be able to still do homestead even though I will not be living in the home. I know that there is some regulation or rule stating if elderly parents can't afford to pay mortgage, then I might be able to get around the 'investment' property rule, but no one has provided me any guidance on what would qualify them for it. I have also looked at a 'life estate' as I believe that will allow me to get homestead still to reduce property tax.

Questions are

1. Does anyone know what the requirements are for someone to buy a home for parents to live in and not be an investment property? 2. if above is not possible, can my Dad and I co sign on the mortgage so that we can get 'primary' house rates? 3. If he does cosign, will Medicaid be able to still go after the house if we need Medicaid down the road for nursing homes, etc? or will the life estate protect him from that? 1. Does a 'life estate' allow for homestead even if I don't live in the house? 4. We planned to use gift of equity since both houses are worth around 300k now. Is there any benefit to have the purchase price around 300k and do gift of equity so that the actual loan amount is what's owed on the house? For tax purposes, is it better to show a higher purchase price for depreciation?

Do we need to report this gift of equity on taxes? I know there is like a limit of $15k a year for gift tax. But the amount over this wouldn't affect taxes other than going toward our lifetime gift tax amount - is this correct?

submitted by /u/One_Main3784
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source https://www.reddit.com/r/RealEstate/comments/mhimhc/best_way_to_buy_house_that_my_sister_owns_that_my/
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