Dear Chuck,

Based on the high cost of retirement housing, we’re considering building an ADU on our property for my parents. We want to make sure it’s a wise investment. They are elderly but healthy and have offered to pay a small rental fee and for all utilities. Do you see this as a good investment? 

Options for Retirement Housing 

Dear Options for Retirement Housing, 

ADU is a new term for me. It is sometimes known as a granny flat, in-law suite, casita, carriage, or guest house. ADUs, or accessory dwelling units, are growing in popularity for adult children or elderly relatives. According to Investopedia, an ADU is “a legal and regulatory term for a secondary house or apartment that shares the building lot of a larger primary home.” 

Some Insights into ADUs

ADUs are sometimes used for an office, studio, gym, or home-based business. They can be rented out or provide space to house friends or family. Buying or selling one separately from the main house is prohibited. 

There are prefab, off-site construction, and on-sight building options. There are DIY assembly packages, those that require professional assembly, and a multitude of builders for custom work. The size, location, and cost vary according to individual needs and desires. In my neighborhood, one neighbor converted an extra garage into a two-bedroom guest house. Another is in the process of building a detached garage with upstairs living quarters. 

Pros

• Rental income
• Can add value to the property 
• Housing for elderly relatives or a nanny for childcare
• A temporary landing for an adult child

Cons

• Costs for building, utilities, property taxes, insurance, and maintenance
• Time and toll of family if there are issues
• Renters who must pay
• Loss of privacy

Do Your Homework 

Jesus used this verse to consider the cost of being a disciple. It is appropriate here as well. “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” (Luke 14:28 ESV) That’s pure logic!

Before diving into the project, check with your city or county to see what you are allowed to build. Zoning laws and permits are extremely important. Gather as much information as you can. If you add onto your existing home, you will gain extra square footage and save on yard space if you own a small lot. Check the bylaws of your home-owner association. What is permissible? Will it add value to your property? Not necessarily. 

I suggest you try to determine your return on investment before proceeding with a project. This requires research on property values, the impact on your taxes, and knowledge of market trends in your location. 

Funding can come from savings, selling an investment, a cash-out refinance, a second mortgage, a reverse mortgage, a home equity line of credit (HELOC), a 401K loan, a construction loan, a renovation loan, and on and on. There are pros and cons to these, and everybody’s situation is different. More information is provided here. To avoid overspending, factor in the additional costs that will accompany an ADU. Do not forget the expense of furniture and appliances. If you plan on rental income, make sure you can cover all bills should a lapse occur. 

Care for Family

Most of our friends who have provided quarters for their elderly family members have truly enjoyed the overall experience. Although it can be hard at times, they have precious memories of being there in their time of need. They learned to establish clear boundaries and financial expectations for occupants. Put it in writing and have it signed and witnessed. If you buy the unit to house your parents, perhaps your siblings will cover other costs of their care. If allowing an adult child to live there, prepare for others to follow in the future. Keep communication open so no resentment or hard feelings ensue. 

An ADU can be a blessing to you and those you love. Just do your research, abide by the law, and work within a clearly defined budget. Consider the priceless memories of showing your parents love and kindness at the end of their lives when determining the true return on your investment. 

Do you want more tools and tips regarding financial freedom? Are you interested in receiving ministry updates from around the world? Sign up to receive the Crown Newsletter emails by using the form on the homepage at Crown.org.

This article was originally published at The Christian Post on February 9, 2024.