Like many Californians, Aislinn and Ali Benjamin were excluded from the neighborhood of their dreams.
And in Danville — a small city east of San Francisco — the median home sale price was $1.8 million in August, according to Zillow. (1)
But instead of pursuing property listings they couldn’t afford, the couple decided to build a $500,000 accessory dwelling unit (ADU) in the backyard of Ali’s parents’ property in San Ramon, next to Danville.
“This was the best decision we ever made,” Ali told Business Insider. “It allowed us to save a lot of money and live where we wanted.” (2)
While the Benjamins spent $500,000 to build the ADU, it is important to note that the couple does not own the home. Under U.S. real estate law, the landowner – whoever holds the title – owns the land as well as the permanent buildings on it. Because the ADU qualifies as a permanent structure, Ali’s parents technically own the ADU.
The couple’s new 1,200-square-foot home — which includes three bedrooms, one of which has been converted into a private sauna and gym — is costing them about $2,900 a month, including utilities. According to Business Insider, Benjamin’s family’s monthly payments are said to go toward the property’s 15-year mortgage, meaning they will likely contribute to Ali’s parents’ mortgage payments. Although the couple may not have equity rights in their new home, they have privately negotiated a deal with Ali’s parents that gives them a share of the ownership.
Before building the ADU, the Benjamins were paying $3,086 a month for a two-bedroom apartment, meaning they now save about $186 a month. Thanks to the solar panels on the roof of Ali’s parents’ house, Benjamin’s family also benefits from lower utility costs as the two families share the electricity bill. With this arrangement, the Benjamins have no homeowners association fees to manage, which means their total monthly expenses are much lower as well.
Then there are the invisible savings: no pet sitting fees, because Ali’s parents are dog sitters. When the couple eventually has children, the grandparents plan to help with childcare — a service that can easily cost $1,370 to $1,630 a month in California. (3)
Meanwhile, all the money they save goes towards their business and investments – Aislinn is the co-owner of a cheerleading, tumbling and stunt gym, while Ali is the owner of a boxing and fitness gym.
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Beyond finances, multigenerational living has social and practical advantages. The Benjamins enjoy being close enough to Ali’s parents to share errands or offer help, while still far enough away to have their own space. The ADU also has a separate entrance and mailbox, giving them some privacy.
“My parents are very private, and they respect our privacy very much,” Ali said. “They don’t come without warning.”
The arrangement will reportedly evolve as the family grows. Once the Benjamins have children, they plan to swap houses with Ali’s parents — moving into the main house, while Ali’s family downsizes into the ADU.
While this arrangement seems to be working for the Benjamins, there are some drawbacks that anyone considering an ADU in a family member’s yard should take into consideration. For example, since Ali’s parents own a 0.34-acre plot of land, Benjamin’s family must settle any major decisions with them.
“Some of the big decisions, let’s say if we want to add a pool or something like that, we’ll need to talk to my parents and see if they’re okay with it,” Ali said.
Then there’s the $500,000 cost of building a house on land the Benjamins don’t own. While the couple may have privately negotiated a property agreement with Ali’s parents, that’s a lot of money to put into a house that doesn’t generate equity for Benjamin’s family.
For some aspiring homeowners, federal and bank assistance programs can provide financial assistance.
For example, the US government’s Housing Choice Voucher homeownership program helps low-income buyers cover monthly housing expenses. Bank of America’s Home Grant program also offers a credit of up to $7,500 that can be put toward closing costs, while the Down Payment Grant program offers up to $10,000 in down payment grants. (4)
However, these programs are limited by the income and eligibility rules of less expensive markets. And in high-priced areas like California, where modest home values exceed $1 million, grants and credits may barely make a dent in the total cost of buying a home.
For Benjamin’s family, building an ADU on Ali’s parents’ lot provides them with savings and perks they wouldn’t have been able to secure by purchasing an expensive property for themselves. Through this arrangement, they can save money while raising a family in a home close to their jobs and loved ones.
There are some drawbacks to this arrangement, but for Benjamin’s family, the pros seem to outweigh the cons.
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zillow (1); Business Insider (2); in the making (3); Bank of America (4)
This article provides information only and should not be construed as advice. They are provided without warranty of any kind.
