Hi all! I have a very long-winded and weird situation that I could really use some input on. I have a lot of personal emotions invested in this property and our plans, so I need some level-headed outside perspective.
I have been saving and planning the last few years to eventually buy property. I have an >800 credit score and, currently have about $40K saved up for a down payment. My original plan was to purchase a duplex (or ideally a triplex or fourplex) and live in one unit. I have been looking at properties in my city, but nothing comes even close to meeting the 1% rule.
However, my situation has changed significantly in the last year or so. My grandparents all passed away in quick succession, which was of course very emotionally difficult. My family and I are just coming out of the grieving period and starting to re-assess our situations with a more level head.
My mother was the recipient of her parents' home, which is about 10 miles from where I am currently living. It is a beautiful log home on 85 acres and has a lot of personal significance to us so while it is valuable, we prefer not to sell. My mom is 70 and has had multiple back surgeries over the last few years. She does not have the energy or health to maintain the property herself.
The deal that we have worked out is this: for now, my boyfriend and I will be moving into the walk-out basement and paying rent ($500 each, or $1000 total). This is pretty comparable to market rent in the area, perhaps a bit low. It has a finished bedroom and full bathroom. We are helping to renovate the rest of the basement. There is already a kitchenette and there once was a finished living area, but most of this was damaged in the 2013 Colorado flood. The bedroom and bathroom have already been re-done after the flood. In the rest of the basement unit, the drywall has already been replaced and the flooring has been ripped out, but we still need to remove the old kitchenette cabinets and replace the flooring. We are going to be DIY-ing most of the renovation, with the exception of re-doing the electrical (the whole house needs this, but we are starting with just the basement) and the plumbing. My boyfriend works for a flooring company so we will get the flooring materials at cost and do the work ourselves. We anticipate spending around $25K on the whole project. My boyfriend and I will do most of the labor, while my mom will cover most of the costs of the renovations.
Eventually, we would move upstairs and rent out the basement likely on AirBnB, but also potentially as a traditional rental. At that point, we would be responsible for all of the costs of maintaining the property, utilities, taxes, etc., but we would have no mortgage payment. We are hoping that rent from the basement unit would help offset some of the costs of maintaining such a large place. Although we are in a rural area, housing stock is low and demand is high, which drives both purchase and rental prices very high. Most of the people in our town commute to either Boulder or Longmont for work. There is also a lot of seasonal tourist demand, as we are very close to Rocky Mountain National Park and Estes Park. There are a lot of music festivals in our town throughout the summer, and many Colorado locals (including people I know!) vacation here.
This is my and my boyfriend's dream home. Our FI dream would basically be to end up on a property like this (or even half of this) to have a large garden, goats, and chickens. So while this may slow down FI, I think it is the right thing to do for us and for my family. While my commute will increase from 5 miles to 16 miles, my boyfriend's commute will decrease by about the same.
In order to make this situation fair to my mother, in exchange for her essentially giving us a mortgage-free home, I am trying to help her out with her own living situation. Ideally, we want something that would allow her to have her independence with less maintenance responsibility, and that would eventually (though I hate to think about this) have potential rental income were she to need to move in with us or to an assisted living facility in her later years. We have a few options:
(1) We could build a "casita" or guest house nearby the main house. We have been looking at some kit homes that are around $29K (plus more for any systems we need to put in). The advantage of this is that we could potentially piggy-back on the well and septic system of the main house, rather than having to pay for establishing a fully new system. The downside is that it would be very close to the main house, and wouldn't really give either of us much privacy. Neighbors in the valley have a similar guest cabin that they rent out on AirBnB.
(2) We could build a full 2 bedroom kit house on the lower 40 acres closer to the road (main house is on the back 40, away from the road). This would give my mom full privacy, easy access to the road to town, and she would still be close enough for us to help her out. We would have to build a separate septic system and a water cistern. Many people in this area haul water, so we would put in a system with that in mind. We would allow her to fill up from our well, but future renters would have to haul water or pay for a well attempt (many attempts here fail). This location is still very close to existing electrical lines, so it would not be hard to add electricity. This would have the additional benefit of being a fully separate home on essentially its own 40 acre lot, which could increase rental potential or be helpful if for some reason we ever needed to sell it.
(3) I could proceed with my original plan of buying a multifamily property in the city (about 15 miles away) and my mom would live in one of the units. She would want a unit with no stairs, a small yard/garden, and the ability to have pets, so these would put some limitations on what properties I would be able to buy. Additionally our housing market is pretty hot right now (our area of Colorado has seen among the fastest growing housing prices in the country over the last couple of years), so I don't think I would be able to find something that meets both the 1% rule and my mom's requirements without serious luck and renovation costs.
(4) She could live in the renovated basement apartment. This would of course negate any potential rental income. It would also put us literally on top of each other, and I have some concerns about this affecting our relationship. We currently have a great relationship but it wasn't always great, so I don't want to rock the boat too much. It would also not really give her as much autonomy. This will probably be what we do while we are building a place for her, but we don't view it as a viable long-term solution.
What would you do? What are some pros/cons of each option that we need to consider?
