Legal/practical advice for buying house with apt for Grandma

Hello- I was surprised not to see this question in the past (but please link if I missed it). We are considering buying a property with a main house for us and an ~1BD apartment or ADU for my mom, who would be moving from out of state. We are considering buying it outright ourselves and then renting to my mom or having her move in with us informally. 

— I’d like to find good legal and/or tax advice about these arrangement options for us as the owners (such as tax deductions, capital gains when we sell, etc). From some reading so far I understand it might depend if the second unit is permitted and considered a duplex vs an unpermitted space in what is considered a single family home. We are open to both Berkeley and Oakland. 

— Open to realtor recommendations for this kind of property

— Appreciate any other tips about the process. Would plan to have a lease and charge market rate, and are aware she would have strong tenant protections no matter what the formal arrangement is (so would be careful if she ever had a new partner moving in, etc, which seems unlikely right now). 

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BPN moderator here: There is some advice that touches on this here: ​​​​​​​Sharing a House with Aging Parents

I recently worked with realtor Kwesi Roberts to purchase a duplex in Richmond. He’s very knowledgeable about this type of property and the East Bay market. Best of luck!

Lots of information online regarding Golden Duplexes and ADU’s and how they fit (and/or are exempt) under Rent Control in Berkeley (I’m less familiar with Oakland.). Seek out information both from the Rent Board, and the Berkeley Property Owners Association. Fully exempt ADU’s would not fall under either rent control or eviction protection; fully covered units fall under both, and there are gradations inbetween; it’s actually rather complicated. I wouldn’t necessarily trust that your realtor will know and understand all of the ins & outs (some do); you might also seek legal counsel (after consulting with both Rent Board & BPOA) to make sure your bases are covered and you fully understand the situation of the particular property you are purchasing.  I highly recommend joining BPOA if you end up in Berkeley; best of luck. 

I am a city planner who has worked for a number of local jurisdictions, and if I were you, I would 100% go for the informal route. Look for a house that has space that can be partitioned off or is separated already, and allow your mom to live there without a lease. (Obviously you and she would have established your understanding of how it would work in practice, sharing all meals? babysitting? free access between the two spaces? before even considering this type of arrangement.) There is just a huge hassle factor in having a legal tenant in a legal space that you would want to avoid if in fact the space is just for your mom or other family members. The tax benefits of being a landlord may not even be worth the headaches of registering the unit (although you should read the Nolo Press landlord book and have a good grip on your tax situation).

You didn't say this was a factor, but if in fact part of the scenario is that you need some funding from your mom to make the purchase, I have seen this get weird fast in my own extended family and would suggest you try to avoid that too by a) not doing it and buying a smaller space without a unit for your mom (perhaps she moves here in a nice rental apartment near by), or b) have her be a part owner with you (ie., name on title) which then forms part of her estate/your inheritance. Obviously that needs even more and better communication about expectations and a shared understanding, especially if you have siblings.

We were in this boat and ended up not buying a conjoined property but a separate condo for a parent nearby.  We talked at length with our realtor about the various scenarios which was incredibly helpful--both short and long term repercussions which depending on the age of your parent and how long you think they may live there can have significant financial implications.   Do you already have a realtor?  If not, maybe look for someone with this experience who can share the options and pros/cons of each.  I'm happy to chat more about our experience if you want to reach out directly.  

Hi -- I have some thoughts I hope will help.

  • For insights on what it might be like to have your mother living with you as she ages, you might want to check out the Sandwich Generation group on Facebook. Every situation is different but it is eye opening as to how people age and what help becomes needed
  • Make sure the ADU can be updated as needed to support someone who is aging (if your plan is to keep her near you as long as possible).  Make sure it has a 'roll in' shower, that grab bars and such can be added, wheel chairs can navigate the ADU, etc.
  • Having her on site makes it easy to help your mom and address her needs and ended up being a better option for me.

Hope this helps and all the best to you and your family