When you say "purchase a rental home," do you mean buy a house in the college town, and then charge your child rent for living there?
Room and board is a qualified 529 expense, as long as the student/beneficiary is at least a half-time student. The qualified amount is limited to the greater of either A) the school determined allowance for room and board, based on the student's living arrangement; or B) the actual amount charged if the student is residing in housing owned or operated by the school.