Moving back home can make life easier for a young adult who is not yet established professionally and financially. Turning part of your house into an apartment can let you enjoy having your child back under the same roof while giving everyone a bit of privacy. Here are some things to consider before you decide whether to proceed.
Cost of Renovations
The price of a renovation project will depend on the scope of the work. If a bedroom and bathroom are next to each other, you might be able to simply put up a wall and a door to separate that area from the rest of the house. Adding another bathroom or a kitchen for your adult child will be more complex and more expensive.
Zoning Rules
Local regulations might not let you turn part of your house into an apartment. If you are allowed to do so, you’ll have to obtain a permit and comply with stringent rules. Failing to follow those rules can lead to a fine and other penalties.
Financing
Consider how you would pay for renovations and whether that would be a wise long- term investment. Paying for an inexpensive project with money you already have in savings might be a smart move.
Tapping into home equity is another way to finance home improvements, but it’s not always a good idea. If you take out a home equity loan or line of credit, you’ll have to make monthly payments, and you won’t be able to use those funds for another purpose, such as unforeseen medical bills.
Discuss whether your child would pay rent and, if so, how much per month. Your child’s contribution might or might not be enough to offset the cost of renovations.
Tax Implications
Renting out part of your house can affect the amount you pay in taxes and which deductions you can claim. Having a family member as a tenant can make things even more complicated. Talk to a tax professional who is familiar with the laws in your state.
Future Outlook
Consider how long your child would most likely live in the apartment. Be honest with yourself. You might intend to have your child move back home for a year or two, but your child might get comfortable and never want to leave.
If your adult child does move out, you might be able to find a new tenant. Consider whether you would feel comfortable taking on the responsibilities of being a landlord, such as handling maintenance and repairs and collecting rent.
