I don’t think there is anything intrinsically wrong with being friends with a gay person. The catch is that you have to be sure you do not compromise your own values, imply that you approve of the lifestyle, or allow the friendship to influence your own children’s beliefs about sexual morality in a negative way. I think there are people who would do a fine job of loving the sinner, hating the sin, and maintaining the friendship. But I imagine it to be a tricky thing, and I know I would have a very hard time with it. For one thing, there are not alot of people who would want to remain friends with a person who strongly disapproved of so many of their life choices. For another, the more examples of sinful behavior that a child witnesses, the more that behavior is normalized - even if the parents eventually (when the children are old enough to understand the details) teaches them that homosexual activity is wrong. And third, it IS really hard to criticize your friends, to let them know that you believe their lifestyle is sinful - takes a lot of guts and alot of diplomacy. But we ARE called to be witnesses to others, so if you can be a good “image of God” to that person" then that is a good thing.
It might be easier with family, because you already have a relationship with your sister - hopefully she will understand your love for her despite your disapproval of her lifestyle. But I do think the best way to have a real relationship with the gay person is to be completely honest with them about your beliefs, your need to look after the morality of your children as the highest priority. If you understand that your friendship has to have certain boundaries, then for it to be a real friendship the other person has to understand that as well. If it all is in the open, then you might be able to have a good relationship with that person. As I said before, I don’t know if I’d be up to that task. But if you are, God bless you for being a good Christian witness.