Author Topic: Mother-In-Law Suite/Casita/House??  (Read 1517 times)

lovesasa

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Mother-In-Law Suite/Casita/House??
« on: April 15, 2018, 11:28:24 AM »
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?

Penelope Vandergast

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Re: Mother-In-Law Suite/Casita/House??
« Reply #1 on: April 25, 2018, 09:56:59 PM »
How is her health? You say she has health issues but what does that mean? Can she drive? Can she walk around easily? Any heart problems etc.?

What is her social life like?

Your answers to these might help you decide. If her health is not great, then she should probably be as close to you as you both can stand -- which would mean option #1, #2 or #4. If you have to drive 15 miles each way to see your mom and end up having to do that several times a week, your travel expenses will really go up, not to mention the time wasted on the road.

On the other hand, if she has an active social life in the area where you want to buy the duplex, then she would probably be happier there. You can always move her into the lower level of the house on 85 acres later if you need to. (Because of this I would highly recommend making the place fully accessible/barrier-free when you renovate.)

Note that a DIY renovation + big garden + animals + caring for older mom + becoming a landlord for the first time, all at the same time, may be overwhelming. (Do you also have a job? Do you plan to have kids?) I don't think you necessarily meant you were going to do all of this at once! just that it sounds like a lot if you do...

Also: if she just inherited a valuable property, you should go talk to an elder law attorney asap, if you haven't already, to make sure her assets are protected in future years. You don't want to get into a position where you have to sell the property in order to pay for her assisted living/nursing home, which as I am sure you know can run $5000-$15,000/month. (Does she have long-term care insurance?)

You also don't want a situation where she gets scammed into signing the title of the property over to some criminal or some horror story like that. There are entire industries devoted to such things. The attorney will probably tell her to covert ownership of the property to a trust in order to prevent this. (Make sure it's an elder law attorney, not just an estate attorney.)

There are also things like Medicaid recovery laws that can force sale of property, take life insurance, etc., after the recipient dies, that estate lawyers may know nothing about. Your mom may never need Medicaid -- you don't say what her income is -- but there are ways to shield her property from the asset limits and then she could potentially use Medicaid to pay for her (theoretical) nursing home.

On another topic, you mentioned flood damage. From rain or a flooded river or? What are the chances of such a flood happening again? Climate change means that you could see such things happen far more often. Do you have flood insurance? Is there a way to change the landscaping around the house to make it less flood-prone?

Overall I think you sound very organized and thoughtful, so I think you will probably make a good decision no matter what : ).

AMandM

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Re: Mother-In-Law Suite/Casita/House??
« Reply #2 on: April 26, 2018, 10:47:57 AM »
First, I'm sorry for your losses. That is a lot to deal with all in one year. I'm glad that it sounds like you have a healthy family to grieve with.

The social aspect is really important, IMO. When I was a kid, my grandmother helped my parents buy a duplex so that she could move across the country to live with us.  In some ways it turned out to be a mistake; apparently no-one had realized that, coming to a new city with a very different culture as a 60-year-old, she would have a hard time making friends. (On the other hand, family members were on hand to help her when her medical and mental condition deteriorated.) We ourselves moved 10 miles within one metro area and rarely see the friends from our old city.

Of your options, the separate house on the front 40 seems the most beneficial in the long term to me, as long as it's close enough for you to be able to go there *easily* to help your mother if she needs it. (I'm thinking of a time when she might need daily help with, say, cooking or medication, but still want to live independently.) It seems like the most flexible plan: it can work for your mother, for an AirBnB, for a regular rental, or potentially even for a sale.

+1 to seeing an elder law attorney to make sure your mother's and your assets are properly segregated and protected. Do you have siblings or other relatives who are also involved, at least as potential heirs?

lovesasa

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Re: Mother-In-Law Suite/Casita/House??
« Reply #3 on: June 15, 2018, 01:58:25 PM »
How is her health? You say she has health issues but what does that mean? Can she drive? Can she walk around easily? Any heart problems etc.?... If her health is not great, then she should probably be as close to you as you both can stand -- which would mean option #1, #2 or #4. If you have to drive 15 miles each way to see your mom and end up having to do that several times a week, your travel expenses will really go up, not to mention the time wasted on the road.

As of now, she is still fairly independent. She can drive, etc. She has had multiple back surgeries and has to wear a back brace and have a day to recover after small things like weeding her flower garden. She cannot carry heavy bags (dog food, soil, etc) without assistance. She is 71 and her parents both lived into their early 90s. However, her parents did not drink or smoke and my mother was a heavy smoker previously (light smoker now) and drinks. She is on high blood pressure medication and generally does not take great care of herself. She doesn't exercise or regularly do her physical therapy, regularly skips meals or eats only milkshakes for dinner, etc. While she is ok living alone for now, I anticipate her needing more help in the coming years.

My grandmother had heart failure and my grandfather had Alzheimer's. My mom is very concerned about developing Alzheimer's and I do have some slight concern about her cognitive decline. She frequently repeats herself and asks questions multiple times. But I think that is more stress and normal forgetfulness than anything serious so far.

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What is her social life like? ...On the other hand, if she has an active social life in the area where you want to buy the duplex, then she would probably be happier there. You can always move her into the lower level of the house on 85 acres later if you need to. (Because of this I would highly recommend making the place fully accessible/barrier-free when you renovate.)

She is not hugely social, but she does talk on the phone with friends/family out of state regularly. She had two very good friends about an hour away, but unfortunately one of these friends passed from cancer recently. The other friend would be far even from the duplex, but regularly visits and they take trips together. My mom's other close friend (since high school) lives in another state.

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Note that a DIY renovation + big garden + animals + caring for older mom + becoming a landlord for the first time, all at the same time, may be overwhelming. (Do you also have a job? Do you plan to have kids?) I don't think you necessarily meant you were going to do all of this at once! just that it sounds like a lot if you do...

Yes, this is a lot! We are starting small. This summer we are focusing on the garden and outdoor cleanup (painting the garage, cleaning up debris and fallen trees, etc.) In winter we will focus on the renovation. My boyfriend's current roommate will be moving in with us and assisting with renovation and yard work. Our deal is that he has a set rent, which can be discounted based on his hours worked on the property each month. We will not get animals until after the basement renovation is complete. So... hopefully one step at a time!

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Also: if she just inherited a valuable property, you should go talk to an elder law attorney asap, if you haven't already, to make sure her assets are protected in future years. You don't want to get into a position where you have to sell the property in order to pay for her assisted living/nursing home, which as I am sure you know can run $5000-$15,000/month. (Does she have long-term care insurance?)

You also don't want a situation where she gets scammed into signing the title of the property over to some criminal or some horror story like that. There are entire industries devoted to such things. The attorney will probably tell her to covert ownership of the property to a trust in order to prevent this. (Make sure it's an elder law attorney, not just an estate attorney.)

There are also things like Medicaid recovery laws that can force sale of property, take life insurance, etc., after the recipient dies, that estate lawyers may know nothing about. Your mom may never need Medicaid -- you don't say what her income is -- but there are ways to shield her property from the asset limits and then she could potentially use Medicaid to pay for her (theoretical) nursing home.

Thank you for this advice! She is currently working with an estate attorney both to settle her parents' estate and to manage her own affairs. She has put the house into her own trust and most of the assets from her parents' will be put into trusts as stipulated in their wills.

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On another topic, you mentioned flood damage. From rain or a flooded river or? What are the chances of such a flood happening again? Climate change means that you could see such things happen far more often. Do you have flood insurance? Is there a way to change the landscaping around the house to make it less flood-prone?

We are located in an area that was badly affected by the 2013 Colorado flood. Our town was actually the one featured on most newspapers! Luckily we are out of town proper and our home is on a hill, so our damage was minimal relative to much of the town (Main street flooded and an entire neighborhood was destroyed and a trailer park washed away). In comparison, we came out just fine, although we had no power or telephone for a month or two. We have since re-graded the yard and driveway away from the basement entrance and my cousin installed french drains. There is one more slope in the yard that still aims that way a bit, so we are having it re-graded when we re-do the yard at the end of summer.

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Overall I think you sound very organized and thoughtful, so I think you will probably make a good decision no matter what : ).

Organized.... Neurotic... Potato, potah-to. :)

Thanks for your advice! I'm sorry I got busy and forgot to check this post for replies.

lovesasa

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Re: Mother-In-Law Suite/Casita/House??
« Reply #4 on: June 15, 2018, 02:12:42 PM »
First, I'm sorry for your losses. That is a lot to deal with all in one year. I'm glad that it sounds like you have a healthy family to grieve with.

Thank you. It has been very difficult. Unfortunately most of our family is decidedly not healthy, but my mother and I are very close. Her sister wants nothing to do with helping settle the estate, which is more a blessing than a curse. Things have gone much more smoothly than I feared.

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The social aspect is really important, IMO. When I was a kid, my grandmother helped my parents buy a duplex so that she could move across the country to live with us.  In some ways it turned out to be a mistake; apparently no-one had realized that, coming to a new city with a very different culture as a 60-year-old, she would have a hard time making friends. (On the other hand, family members were on hand to help her when her medical and mental condition deteriorated.) We ourselves moved 10 miles within one metro area and rarely see the friends from our old city.

That's a very good point. Luckily we are only about an hour drive from where my mom has lived for the last 30 years, so it's not quite as drastic of a change as it could be. My mom is mostly a homebody anyway and has never been very social. I am making a point of encouraging her to have lunch with her friends when the opportunity arises, and she has also gone on a couple of road trips.

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Of your options, the separate house on the front 40 seems the most beneficial in the long term to me, as long as it's close enough for you to be able to go there *easily* to help your mother if she needs it. (I'm thinking of a time when she might need daily help with, say, cooking or medication, but still want to live independently.) It seems like the most flexible plan: it can work for your mother, for an AirBnB, for a regular rental, or potentially even for a sale.

I think this is what we are leaning towards as well. While she is fairly independent now, she needs more help than I anticipated with tasks such as carrying heavy groceries, etc. I think this is likely to only increase as time goes by, so I would rather be able to stop by daily to assist her than worry about her not wanting to "bother" me and not asking for help. Our area has a huge rental shortage, so the town has been very lenient in allowing auxiliary buildings. We are also a popular tourist destination and close to the national parks, so I don't think we would have trouble renting either long term or short term once my mom is no longer able to live there.

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+1 to seeing an elder law attorney to make sure your mother's and your assets are properly segregated and protected. Do you have siblings or other relatives who are also involved, at least as potential heirs?

I didn't realize that there was such a difference between Elder Law and Estate Law. My mom is currently working with an Estate Attorney to settle her parents' affairs and get her own in order. I will do more research and encourage her to consult with an Elder Law attorney.

I have 3 half siblings from my father's prior marriage, but I am my mother's only child. I anticipate her leaving some assets to my half-siblings and their children, as well as her nephew, but likely the bulk of her assets will go to me. I am also her medical and legal POA, or will be as soon as her affairs are in order. Having seen how complicated things were with her parents' medical issues and estate, she is trying to simplify things as much as possible for me. That being said, she does not have a lot of energy and gets overwhelmed easily, so I may need to assist her with some of this.

My parents are divorced, but my father is a... difficult person. I do not have a good relationship with him.

I fully expect him to claim common law marriage (they lived together for years after the divorce) and to attempt to make claims against her estate. He has even more health problems than my mother and no retirement savings. He has already blown through the small inheritance he received after his parents passed last year. Luckily he is a veteran and has recently been declared partially disabled, so he is getting medical care through the VA in addition to Social Security and Veteran's benefits. He also has the aforementioned 3 other children so hopefully his burden will not be fully on me, although I may need to account for financially assisting him once he is unable to work.

I would be very open to any suggestions as to how she can protect herself from him, as well.