Like many Californians, Aislyn and Ali Benjamin found themselves excluded from the neighborhood of their dreams.
In Danville, a small city east of San Francisco, the median home sales price hit $1.8 million in August, according to Zillow. (1)
But instead of looking at properties 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, which is 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’s important to note that the couple does not own the home. Under U.S. real estate law, the landowner (whoever holds title) owns both the land and any 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 with three bedrooms, one of which has been converted into a private sauna and gym, costs them about $2,900 a month, including utilities. According to Business Insider, the Benjamins’ monthly payments supposedly go toward the property’s 15-year mortgage, meaning they likely contribute to Ali’s parents’ mortgage payments. And while the couple may not be gaining equity in their new home, they may have privately negotiated a deal with Ali’s parents that gives them a share of the property.
Before building the ADU, the Benjamins paid $3,086 a month for a two-bedroom apartment, which means they are now saving about $186 a month. And thanks to solar panels on the roof of Ali’s parents’ house, the Benjamins also benefit from lower utility costs, as both households split the energy bill. With this deal, the Benjamins don’t have to manage any homeowners association fees, which means their total monthly expenses are significantly lower as well.
Then there are the invisible savings: There are no pet-sitting fees, because Ali’s parents are also dog-sitters. And when the couple finally has children, the grandparents plan to help with childcare, a service that could easily cost between $1,370 and $1,630 a month in California. (3)
Meanwhile, all the money they’re saving is going into their businesses and investments: Aislyn co-owns a cheerleading, tumbling, and stunt gym, while Ali owns 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 help out, while still being far enough away to have their own space. The ADU also has a separate entrance and mailbox, giving it some privacy.
“My parents are very private and very respectful of our privacy,” Ali said. “They don’t come unannounced.”
The arrangement will reportedly evolve as the family grows. Once the Benjamins have kids, they plan to swap houses with Ali’s parents: moving into the main house, while Ali’s family moves into the ADU.
While this arrangement seems to work for the Benjamins, there are some drawbacks that anyone considering installing 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 clarify any major decisions with them.
“Certain big decisions, let’s say if we wanted to add a pool or something like that, we’d have to talk to my parents and see if they’re okay with it,” Ali said.
And then there’s the $500,000 cost of building a home on property the Benjamins don’t own. While the couple may have privately negotiated a property deal with Ali’s parents, that’s a significant amount of money to invest in a home that doesn’t build 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 cover monthly housing costs. 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-priced regions like California, where modest homes top $1 million, grants and credits can barely make a dent in the total cost of purchasing a home.
For the Benjamins, building an ADU on Ali’s parents’ lot offers them savings and benefits they would not have been able to obtain by purchasing an expensive property for themselves. With this deal, 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 the Benjamins, the pros seem to outweigh the cons.
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Zillow (1); Business insider information (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.
