Unusual Housing Questions

[MelodysMustache]

Very recently a close relative proposed a plan that has me rethinking my own long term plans.

My plan had been to work another 10-15 years, then move to a lower cost of living area within my current state for retirement, using the equity in my house for part of the retirement funding.   Now there is a proposal that a few members of my extended family go in together to purchase land and build houses so we can have a multi-generational family compound.  We would of course sell our current homes after the houses are built.

We agree that location should be semi-rural, but still close enough to the city to make commuting for work possible.  We all get along very well, everyone is sensible and financially prudent, and I am the only one who still has a mortgage.  There is some wealth in the family that is being put on the table in the form of low interest loans to help make this happen.

The timeline is at least a couple of years to find the land and build.  It sounds like a complicated mess to deal with everything from zoning laws to merging individual tastes and desires, to building, to finances to make this happen.  It is also likely to be more expensive for me than my old plan, but I love my family and I am willing to work longer to make it work.

My current mortgage is sub 3% interest rate and I have not been paying extra.  My only debt is the mortgage.  I have been putting reasonably large amounts into my retirement funds.  I think a mortgage loan from family is a different scenario and should be paid off as quickly as possible.

Since this is an unusual situation, I would appreciate some feedback for things to think about.  Should I stop putting extra in retirement account and start stockpiling cash?  Are there legal concerns that we should be aware of?  Should I stop working on the set of minor upgrades I have on my current house?

[Dicey]

I've always thought this was a great idea.

My cousin, her brother and their parents went together on a house in Maine. They built it to accommodate everyone's needs and have room for their families and guests. It is a second home for all of them, which could make a difference. Generally, when one is there, most of them are there. They all love it and consider it one of their best investments. At one point, none of them were living in the US. They all said they loved having the house was a way to anchor the family. Perhaps not the most frugal arrangement, but they got a lot of bang for their bucks and are all otherwise financially stable.

I've always wanted to do something similar. I have a lot of single female friends who may not have enough in retirement to live comfortably. I'd love to build a co-housing complex so they could live without financial fear in their old age.

[BlueHouse]

I love the idea too. I've floated it around in my family too, but unfortunately the only ones interested are the ones who are in debt and haven't saved for retirement.  So they see it as my buying a family compound to which they would be entitled to live. 
Not only do I not have enough to ever do something like that, but how on earth do people with these views not get the whole "sacrifice some luxury now for peace of mind later" thing?  They think the fact that they have to pay their credit card bills for expensive tastes somehow equals my "going without". 

[Silverwood]

I'll be listening  in on this thread :)  I joked about building a women's complex with my neighbor, as she divorced her husband and was struggling a bit.  We thought it'd be great fun. Although women can be a bit catty. 

[Fonzico]

We've discussed this with varying levels of seriousness within my family also. We would like to buy enough land that each family could have their own abode, likely with a central compound with a shop etc.
My family is quite financially prudent - my parents have a paid off house that could fund some of this if need be, and I think my sister has about $100,000 equity in her place. Really, my husband and I are the least able to contribute at this point! But we do have an at-home business, and lots of youthful energy to contribute. Plus, we'll have a decent amount of savings within a few years here, if this happens any time soon.

I think we'll approach it more seriously once my sister's kids are out of school, which gives us a generous 9 year timeline. I really do think it could work though, and offers a viable solution to caring for aging parents (not that mine are anything other than hale at the moment), while maintaining independence for all, and sharing the load.

[begood]

I think it's a brilliant idea, especially compared to how spread out so many families are now. I joke sometimes about our retirement plan being following our daughter from place to place (my husband says we'll get an RV and set up in her driveway!) but I can definitely see the appeal in having generations living close to each other, providing elder care or child care as needed, and sharing life's burdens.

[theonethatgotaway]

Considering how many immigrant families live like this in NYC -multi generational multi family, I dont see any negatives. They share one house between 15-20 people in most cases. You are talking about multiple houses and a shared common space.

The biggest hurdle will be location.

I proposed this exact idea to my extended family -all high earners high savings, but it seemed just too 'out there' for them :)

Good luck!

[Cromacster]

I personally, would be very reluctant in such a situation...or rather I would not do this.  Whenever you are entangling finances with family things can get messy.  I would be interested in the possibility of selling.  You call it multi-generational, which seems to imply you would hand it down at some point....so do you not have the choice to sell it?  What if something were to happen where you were required to sell?  It sounds as if your family is well off so such matters may not be an issue.

My siblings have already thrown out the idea of purchasing a lake property or some cabin jointly.  Even though it's the beginning stages and they aren't anywhere near ready for such a thing I told them I wasn't remotely interested.  I think this annoyed them because it would delayed their plans even further.

[fixer-upper]

Using a family trust as a funding mechanism would provide some advantages.

[Catbert]

Well, I wouldn't want to live so close to family, so my prejudice is clears.  So keep that in mind when I say...

What's the exit plan?  Would these be houses on individual lots so you could sell if you wanted?  Or would you own a share of a larger lot (compound) with the rest of the relatives?  If it's one compound how would title be held?  How would decidions about money be made?  What if you get married/divorced/relocated and wand to leave?  What about when the older generation starting dying and the cousins you don't like inherit?

Lots of questions that you should figure out the answer to before opting in.   

[Nudelkopf]

I'll be listening  in on this thread :)  I joked about building a women's complex with my neighbor, as she divorced her husband and was struggling a bit.  We thought it'd be great fun. Although women can be a bit catty.

Just invite some dogs to live there too, that should even it out ;)

[scrubbyfish]

LOVE it.

My exBF has proposed we do this with my family, me, him, etc. We'll see.

I've lived (though not with my family) in this type of arrangement. My thoughts from that:

-if anyone is super ideological on any count that differs from the group's "mainstream", to the point that they REALLY want everyone else to share the ideology, don't bring them in;
-allow each person not only their own little home, but also a personal yard space that they are free to fence -this prevents lots of concerns pertaining to pets, gardening styles, privacy boundaries;
-encourage the use of a "do not disturb" system or better yet a "do disturb" system, regardless of how much everyone likes and enjoys each other;
-give the collective first right of refusal if anyone wishes to sell their share;
-give the collective total say in who moves in, and an excellent plan for funding any shares not currently covered by anyone (e.g., empty home)

In BC, Canada -don't know if/how many other places- we have an option of a mixer mortgage, allowing people to share space yet each be responsible for their own portion/debt.

[MelodysMustache]

Thanks for the feedback and helpful ideas.  I have never heard of a mixer mortgage and I don't think they have them here.

Fortunately, we are all pretty much on the same page when it comes to ideology and lifestyle.  Well, those who are not, are not invited which is good. 

Using a trust in an interesting idea and I have also thought that an LLC might work.  The thought about location being the hardest part is probably true.  I have no idea what zoning limitations we might come up against.

It would have to be an extreme situation to cause one of us to exit once households are established, but the next generation might not feel the same when the day comes that they inherit.  So the thought about an exit strategy being setup at the beginning is wise.

It's interesting that so many people responded positively to the idea.  It does seem that we have lost something in our culture by each nuclear family being so isolated.  I moved to my current location from another state specifically to be closer to this branch of my family and as the years go on our bonds are stronger.  So the thought of having my family as neighbors/co-owners is very nice.

[mozar]

I don't think there is a mixer mortgage, but I know you can get a group mortgage. My ex's friends did this with one large house. On top of the mortgage they paid extra to a group fund. This was for maintenance, as well as a fund in case anyone wanted to sell their share and needed to be bought out. They also rented some of the rooms.

[scrubbyfish]

MelodysMustache: The approach you are talking about is similar to or even the same as one some people call "cohousing". There are some books on this topic, using that term, which specifically detail how a group of people might set it up, what to consider, legal options, etc. Most of these books come out of the States, so may be especially applicable. These books talk about strangers doing this set up, but the legal logistics, etc, might be of interest.

[Gerard]

Lots of good advice (and warnings) on here already. I have a different suggestion: play up the unusual characteristics of this situation to get the most for the least, by sharing at least some of the functions that consumerist private housing now thinks of as one-to-a-house. Build little houses, and make the "room to entertain" a separate, shared facility. Maybe even have limited kitchen facilities in each house. Share a laundry room, maybe? Or recreational space? Playroom? Treehouse? Veggie garden? Have wee bathrooms with only showers, and a shared giant tub? Some of the shared spaces can be pretty basic, because they're not in constant use (your "entertainment space" could be big and barn-like, maybe even un-insulated if you don't party in January much).

I think if you google "co-housing" you'll find lots of ideas in this vein, as well as good advice on how to deal with potential conflicts that may arise.

[Thegoblinchief]

Along the shared spaces idea, even in temperate climates outdoor kitchens are rad.

[arebelspy]

Our families are too far apart and too independent to do something like this, but I've always dug the idea of a Mustachian-type community.  Almost like a commune, but with everyone FI, no one needs to worry about "slackers" that often can ruin such a community by freeloading.

[Cassie]

When I was 25 the house next door to my parents went up for sale & we bought it. My kids loved living so close to their grandparents and it made everything so much easier.  If they needed help we were right there & they helped with the kids.  My hubby really enjoyed it too. They never came over without being invited.  I think if you get along well & have good boundaries this can work.

[frugaliknowit]

I don't like the concept.  Too much can go wrong, and when the RE market does what it did from 2006-2010, you've got a huge problem.

You can accomplish the same by moving (separately) to the same small town, condo complex, subdivision or even apartment building with much more flexibility.

[iris lily]

The idea of co-housing gives me the skeevies except, oddly, when I think about it in the context of my extended family. Then I could do it. I guess that's because I trust them and know that their values are mine. It would be fund to live with my cousins, their children, their parents.  but of course we'd have our own dwellings.

I've heard these schemes of compounds before and they don't seem very practical to me. Why not identify existing places, such as a block of small houses, or a group of condos (if no one cares about having available land on which to grow stuff) and utilize real estate that's already platted and sellable if someone wants out.