Multigenerational home

[GoodLiving]

So I thought I would put this here figuring folks who know real estate might have this knowledge but admins feel free to move it somewhere else if you think it should be.

My spouse and I are thinking about buying a single level side by side duplex, we would take one and my adult child and their spouse (both 30) would live in the other. We, of course would have very clear boundaries so that neither sides feel like they have their personal lives intruded on (and we might want to walk around naked too ). They don't currently have enough (income or down payment) to purchase a single family home current median housing costs $336,800. Depending on the neighborhood, we might be able to purchase a duplex outright by selling our paid for cabin and townhouse. The biggest questions for me would be the most advantageous means of ownership. Assuming everything goes right, it would be a very long term home for all folks involved but we're realistic in that relationships can end, people die, folks relocate for jobs and etc. This is my only child. They don't have any children and possibly might not have any, we wouldn't be expected to be babysitters. Eventually, if our money lasts and we die before we need to access equity of the house, they just inherit the property and they can do with what they want. We could rent them the other side at a below market rate if that has better tax implications. I don't know enough of ownership, taxes and etc to make it most advantageous or even who to talk to. Real Estate attorney? Tax person?

I would appreciate your thoughts. Thanks

[LivingAlmostLarge]

Does your child and their spouse want to live there? Is it in an area they would want to live in? Do they want to live forever in a duplex? Will they move out to a home because they want more space? More than financial considerations might be the logistics of it

[kork13]

This actually sounds like a very simple & good decision (presuming, as I gather, that your relationship with your child/spouse is good with minimal friction).

The best way to go about it is to mentally ignore the fact that it's your child. You want to own an owner-occupied duplex, intending to rent out the other side. Keep it like that, nice & simple.

That will make it easier to think through the taxes, without the complication of family. It's really quite simple. You report the rental income as ordinary income on Schedule E. That income will be offset by expenses you can directly tie to the rental, such as a share of insurance, property taxes, maintenance on the rental, and so on.

However, be careful with renting the duplex significantly below market rent. Doing so can lead to you losing the tax status as a rental. You can get away with 10% below market... *maybe* up to 20%. But beyond that, if it's recognized, it could be a huge pain with the IRS.

Talking to a tax guy (with experience working with rental properties) would certainly be of benefit.

[ua_guy]

Sharing a purely anecdotal story. We had a family move in next to us. The place was a 3k sqft home with a detached garage and an ADU/ accessory dwelling unit built over the garage building for about another 1500sqft. It was a husband/wife and two young children, and her parents (in their 60's). We only knew them a short time before we moved for a job offer, but it seemed to work out well for them. The story was the wife received a relocation package for a really good opportunity. The grandparents didn't want to be all the way across the country from the kids, and the price of real estate in our area is astronomically high. So, they found this place and it was a done deal. Her parents moved into the ADU and the family took the main house. They clearly had boundaries and visitation rules. I was over there once and the kid had left something in the grandparents ADU, and his mom said he could go over and quietly knock to see if they were home. If not, he would have to ask them later.