Like many Californians, Aislyn and Ali Benjamin were priced out of their dream neighborhood.
In Danville — a small city east of San Francisco — the median home sale price hit $1.8 million in August, according to Zillow. (1)
But instead of chasing listings they couldn’t afford, the couple decided to build a $500,000 accessory dwelling unit (ADU) in the backyard of Ali’s parents’s property in San Ramon, which is next to Danville.
“This was the best decision we ever made,” Ali told Business Insider. “It allowed us to save so much money and live where we wanted.” (2)
While the Benjamins spent $500,000 to build the ADU, it’s important to note that the couple does not own the home. Under U.S. real estate law, the landowner — whoever holds the title — owns both the land as well as the permanent structures on it. Since an ADU qualifies as a permanent structure, Ali’s parents technically own the ADU.
The couple’s new 1,200-square-foot home — complete with three bedrooms, one of which was converted into a private sauna and gym — costs them about $2,900 a month, including utilities. According to Business Insider, the Benjamins’ monthly payments reportedly go toward the property’s 15-year mortgage, which means the’re likely contributing to Ali’s parents’s mortgage payments. And while the couple may not be earning equity in their new home, they may have privately negotiated a deal with Ali’s parents that gives them a cut of ownership.
Before building the ADU, the Benjamins paid $3,086 a month for a two-bedroom apartment, which means they’re now saving around $186 per month. And thanks to the rooftop solar panels on Ali’s parents’s house, the Benjamins also benefit from lower utility costs as both households split the power bill. With this arrangement, the Benjamins don’t have any homeowners association fees to manage, which means their total monthly expenses are significantly lower as well.
Then there are the invisible savings: no pet-sitting fees, because Ali’s parents double as dog sitters. And when the couple eventually has children, the grandparents plan to help with child care — a service that could easily cost $1,370 to $1,630 a month in California. (3)
Meanwhile, all of the money they’re saving is going toward their businesses and investments — Aislyn 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 the finances, multigenerational living has social and practical perks. The Benjamins enjoy being close enough to Ali’s parents to share errands or a helping hand, while still being far enough to have their own space. The ADU also has a separate entrance and mailbox, which gives them some privacy.
“My parents are very private, and they’re very respectful of our privacy,” Ali said. “They don’t come over unannounced.”
The arrangement will reportedly evolve as the family grows. Once the Benjamins have children, they plan to swap homes with Ali’s parents — moving into the main house, while Ali’s folks downsize into the ADU.
While this arrangement seems to work for the Benjamins, there are some drawbacks that anyone considering an ADU in a family member’s yard should consider. For example, since Ali’s parents own the 0.34-acre lot, the Benjamins must clear any major decisions with them.
“Certain big decisions, let’s say if we wanted to add a pool or something, we would need to talk to my parents and see if they’re on board,” Ali said.
And then there’s the $500,000 cost of building a home on property that the Benjamins don’t own. While the couple may have privately negotiated an ownership agreement with Ali’s parents, that’s a significant amount of money to put into a house that’s not earning equity for the Benjamins.
For some aspiring homeowners, federal and bank assistance programs can provide financial assistance.
For example, the U.S. government’s Housing Choice Voucher homeownership program helps low-income buyers with covering monthly housing expenses. Bank of America’s Home Grant program also offers credit of up to $7,500 that can be put toward closing costs, while its Down Payment Grant program offers up to $10,000 in down payment grants. (4)
These programs, however, are limited by income and eligibility rules for lower-cost markets. In high-price regions like California, where modest homes top $1 million, grants and credits may barely put a dent in the total cost of purchasing a home.
For the Benjamins, building an ADU on Ali’s parents’s lot offers them savings and perks that they wouldn’t have been able to secure by purchasing an expensive property for themselves. With this arrangement, they can save money while starting a family in a home that’s close to both their jobs and their loved ones.
There are a few drawbacks to this arrangement, but for the Benjamins, the pros appear to outweigh the cons.
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Zillow (1); Business Insider (2); Tootris (3); Bank of America (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
