Ask a Realtor: Should parents create rental units in their home?

Question: My father and mother live together in a six-bedroom, five-bath house in Northridge. In the last three years, all three of the kids have moved out. My dad's business isn't doing that well, so he is trying to think of ways to earn a living. But he's over 60, so starting a new career isn't really a feasible option.

His current idea, which he is serious about, is to invest $25,000 into converting the maid's room and guest room areas (which are connected to the house via a garden room and contain a bathroom, study, and bedroom) into two rentable units that would cover the monthly mortgage.

I think this is an awful idea. First of all, there is no need for he and my mother to continue living in a pricey L.A. suburb, much less in a house so large. Second, what would chopping up a house in such a manner do to its resale value? He wants to keep the house (largely for sentimental reasons), which is entirely impractical. Odds are he will have to end up selling after he has butchered it into pieces.

Please give me any advice you can. He is set on this idea, and from what I know of real estate (not much), this will not be successful and will only hurt our already dwindling economic standing.

What would you recommend doing? In this type of situation would it be better to downsize and invest the profits from the sale in different properties? Or does his idea have any merit?

I truly would appreciate your feedback. Sincerely, Tamar K.

My take: Realtor David Kean makes good points below about whether extra units are even allowed. It's possible that one guest unit is permitted but not two.

I have a personal perspective. My 84-year-old mother-in-law, Jody, converted a 100-year-old Victorian in Santa Barbara into rental units several years ago. (You can see Jody above on her lawn with her great granddaughter.) She loves being a landlady and having young people, and their dogs, around her. Her goal is to remain active, useful and independent. Having her college-student-age renters around her actually makes that goal more realistic. Your parents might enjoy having renters. It might not be all about the money but about creating a little community right on their own property.

A Realtor's perspective: From Prudential agent David Kean: The first thing to check are local zoning restrictions. The house may not be properly zoned for multiple residences, so check with the city.

The second factor to consider is how long it will take to recoup the cost of the renovations. The $25,000 figure seems too low an estimate for adding two kitchens and another bath. It may take one to two years before your parents start to turn a profit. A lot can change in a year or two. Ultimately, is it worth the cost and stress of a remodel?

The renovation could work out well if done properly. It would be wise to speak to an architect. The units should have the feel of separate guest apartments. Make sure the conversion blends into the architecture of the house.

The apartments should not feel completely disjointed. One unit would be preferable to two. One unit would give the feeling of a separate guest house, while two units might seem out of place in a private home.

They could close the access from the main house and replace a window with a French door, creating a new access point for the rental unit. There are interesting modular kitchenettes on the market. They are easy to install and, more importantly, easy to remove if the home is eventually put up for sale.

On the upside, future buyers may like the apartment or apartments for a home office, a workshop, an apartment for an elderly parent or older child, or purely for rental income.

Comments

[Terry Sprouse]

I agree with Kathy, and David Keane. I think converting rooms to apartments is a good way for many older people to stay in comfort in their own houmes with added income, security and services.

I suggest reading "Creating an Accessory Apartment" by Patrick H. Hare & Jolene N. Ostler. It's out of print but availble through Amazon.com.

[INland Empire]

Several questions come to mind. How long will it take for the rents to cover the cost of construction? (a very long time I think). Do the parents want a tenant living that close to them? (potential for problems of all kind - too much noise, lifestyle, etc.) How are they going to screen people and not end up renting to an ax murderer? I would also recommend that if they do end up renting a portion of their home out, make sure NOT to rent to family or friends.