Last month my 89 year old father-in-law fell while he was at home alone. My mother-in-law was running errands and when she got home, she found him on the floor of their bedroom disoriented, exhausted, and unable to get up on his own. Fortunately, he just needed to spend a couple of days in the hospital for testing and he is recovering nicely at home. Unfortunately, they doctor recommended that it is time for additional care.
Does this sound familiar? Or is this a very real possibility that can happen to your parents or in-laws? In my mind I still see them as active seniors but the reality is that my parents and mother-in-law are in their 70’s and my father-in-law is 89. It’s time to seriously start thinking about how to care for them as time progresses and to make a plan to ensure their health and safety.
Now let’s be honest, the solution is more complicated than just saying, “Buy an ADU!” Afterall, money is a big issue here. Not only that, but there are several different options that can play out. After talking to the ADU specialists at ADU Warehouse, here are a few ideas that my husband and I are pondering for the care of our family:
- The good news is that my parents’ home is paid for. They could sell their home and purchase the ADU that would go in our backyard. Not only that, but they would still have a nice nest egg to pay for the unknown like medical bills, possibly pay us rent to have the building on our property and to share utility fees, and in the circumstance in which they would need more medical attention at an assisted living facility, they could prolong this expense and use the funds when needed. Many senior homeowners have substantial equity in their homes that could pay for the ADU or they own their home free and clear and could reinvest that money into real estate with an ADU. In my opinion, this is our best choice.
- The bad news is that I know of other aging parents who are not homeowners or have pulled out the equity in their home so they don’t have this resource to rely on. In this case, the equity in the adult child’s property in which the ADU would be built on could be used to fund the ADU. (As in ALL of these circumstances, be sure to discuss these possibilities with your CPA, real estate professional, and financial advisor. Each situation is unique and mortgage rates and home prices vary.)
- Here’s a third option that I’m seriously considering because we’re in this “sweet spot” where our parents are still independent and our kids are still young. We could use our current equity and invest it in an ADU. Since we currently don’t need it for our parents to use, we could rent it out and the rent would essentially pay for the unit. Again, this is an example based on my current situation, but if I purchased a $300k ADU and borrowed $300,000 at a 6% interest rate with a 30 year conventional loan, then my monthly payment would be $2,206.98. The average one bedroom, one bath apartment in Concord, CA averages $2,269/month. This means that my ADU can pay for itself until my parents are ready to use it. Be sure to talk to your lender for specifics and for your real numbers.
- But what happens AFTER my parents use it or what if I build it and my mom decides to move to Florida and live like she’s one of the Golden Girls? Again, we can rent it out or I’m thinking that one of my daughters can use it when they are in their 20s. This can go two ways: they can either rent it from me or buy it from me with their monthly payment. With housing prices where they are currently and with inflation rocketing sky high, this would give them a chance to become homeowners and they can still have a private space of their own.
- Now think outside the box: What if your parents moved into YOUR existing home and YOU moved into the ADU? Or what if you built an ADU on THEIR property and you lived in it instead? Now why in the world would you want to do this?!? This is an interesting choice if your parents don’t want to move but you want to be closer to take care of them (especially if you don’t have kids or if you’re an empty nester). Or maybe your parents live in a great neighborhood that you want to live in? Build an ADU! This is also helpful if your parents are financially secure but YOU want to downsize and reduce your costs. Instead of paying rent or being house poor, an ADU allows you to invest your money into your future.
The median monthly cost of senior independent living in the U.S. is $2,552, according to A Place for Mom’s 2018 cost index. Now think about inflation over the past few years… that cost is undoubtedly a lot more! And that was for “senior independent living.” For assisted living, the monthly average shoots up to around $5,200 depending on location and care needed.
An ADU is a great option because you get to keep grandma and grandpa close and cared for while investing that money in real estate. Additionally, there are amazing floor plans with today’s ADUs. From studios to one bedroom, two bedroom, and one bedroom with larger great rooms, the choices are incredible to suit your aging parents’ needs and your backyard layout.
Do you have questions about whether an ADU is right for your family? Call ADU Warehouse today! Our real estate partners will assess your property value and rent potential, our lender partners would love to discuss financing options with you, and our ADU specialists will review your property layout and discuss floor plans and timelines with you. Contact us today! We’re here to serve you and your family!
