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Own a home with mom and dad? You may want to take precautions

It may be time to broaden the definition of “helicopter parents.” If you thought it was just for parents of those under the age of 18, then you are not aware of a new trend that has been steadily growing in the United States the last few years. It is called multigenerational households and is defined as at least two adult generations living together, or a household that includes both grandchildren and grandparents.

This type of living arrangement continues to rise—right now there are 64 million Americans living in multigenerational homes. This is up from only 32 million in 1950. California is the second highest state in the country for the percentage of households that are multigenerational.

Why are people choosing multigenerational households?

There are multiple reasons for generations of families to choose to live in the same home. One of the most popular reasons is eliminating the increased cost of long-term elder care for older parents who can stay with their adult children. Another benefit is when the younger adults head off to work, they enjoy the built-in day care retired grandparents can provide.

Some married couples choose this new living arrangement as a way to buy a new home along with their parents and keep their share of the mortgage payments low. When they invite the parents to not only come live with them, but be part owners too, there can be a different dynamic going from guest to an owner. It would be wise to understand everything you are getting yourself into when co-owning a home with parents or in-laws. 

Do you need a “housing prenup”?

If a married couple and a set of parents purchase a home together, they are becoming equal partners in what could be a large financial transaction. Because of this, it may be smart to get all the parameters figured out before anything gets signed. What if somebody wants to move out? What if someone has a baby that disrupts living arrangements? Can anyone make major changes to the house on their own? You may want to address these questions, among others, in a formal contract. You may also want to use a formal contract to address insurance and taxes on a new house.

It is not just a written contract you should consider before buying a home with mom and dad. Many multifamily homes come with confusing regulations pertaining to zoning that you need to understand right away. For example, if family members will be living full-time in a structure in the backyard of a home, zoning may require that structure to have its own driveway. You will want to know information like this sooner rather than later.

Is living with extended family for you?

You may not know if living with and owning a home with your parents or adult children is something you can be happy with until you do it. It may be a wonderful experience, but what happens if things turn sour? If addressing problems with family is a difficult thing for you, then having a pre-determined written plan in place may be the way to go.

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