Jeff Brown writes a biweekly blog about the Sandwich Generation and the financial issues its members face as they try to help their parents and their adult children. The blog appears on Next Avenue and on the website of the public television show Nightly Business Report. A financial journalist, Brown brings personal expertise to the subject: He is part of the Sandwich Generation.
It’s not a moment anyone looks forward to, but sooner or later many Sandwich Generation families must face the issue: What to do with the home Grandma and Grandpa lived in for all those years?
Even if your parents' place is a nifty, modern condo bought for their retirement, something will eventually have to be done with it, either when they die or they can no longer handle the maintenance, expense or stairs.
At Stake: Money and Emotions
It’s a tough issue that can involve a lot of money, emotions and conflicts among family members — your parents, siblings and all of your children and grandchildren.
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Some may want to hang on to the place for sentimental or financial reasons. Others won’t want the headaches or expense and might prefer to convert this equity into cash to pay off bills, save for retirement or cover the grandkids’ college tuition.
Obviously, with all these crosscurrents, there’s no one-size-fits-all approach to this important financial matter.
The best overall advice I can offer is to urge all family members with a stake in the decision to give it some thought in advance and make sure everyone knows the pros and cons of every option. That can help the family avoid the pitfalls that come with hasty decisions.
What My Mom Will Do
Here’s how we’re keeping all options open for my 80-something mother and her raised ranch in the New York City suburbs:
Mom’s in great health and has no trouble keeping the house in good condition or marching up and down the stairs 20 times a day. If those stairs ever become an obstacle, my mother has decided that the ground floor office would serve nicely as a bedroom; there’s a full bath next to it.
Other than needing to find ground-floor space for a washer and dryer, she could quickly consolidate her life to that level. Also, my mother has kept up with all the maintenance so if her house had to be sold, it could go on the market right away.
But things aren’t so easy for other families. So, a few thoughts…
Sell Sooner Rather Than Later
As soon as your parents’ home becomes a problem for them – because of expenses, unneeded space or a layout that’s no longer suitable due to their age or health – it’s time to explore putting it up for sale.
In many cases, the grandparents can benefit from downsizing into a home that’s smaller, cheaper and easier to manage.
Many older homeowners postpone downsizing until their finances or health forces them into it. But downsizing earlier can let your parents avoid years of uncomfortable living conditions and higher-than-necessary expenses, like taxes, home maintenance and property insurance. Downsizing sooner can also make their retirement funds last longer.
If their current home is paid off and fetches more than a new one will cost, your parents can use the excess equity for living expenses or invest the cash.
Be Sparing With Home Improvements
It’s not uncommon for a grandparents’ home to be a bit dated. Should they (or you and your siblings) make major improvements before selling it, like redoing the kitchen and baths?
If your parents won’t be moving out anytime soon and family members will enjoy the home improvements for years, the expense could be worth bearing. (Next Avenue has a useful article on retrofitting a home so an older resident can age in place.) But a major renovation on the eve of selling probably won’t be worth the cost.
(MORE: Home Repair: When NOT to Do It Yourself)
For years, Remodeling magazine’s annual Cost vs. Value Report has shown that, on average, no major improvement adds as much value as it costs — not a new kitchen, new bath or an addition. A major kitchen redo, for instance, cost an average of $57,000 last year and added only $38,000 to the home’s sales price.
The only way to make major improvements on your parents’ home profitable is to get the labor for free. In other words, you and your siblings will have to do the work yourselves. For most people, that pretty much means just jobs that nearly anyone can do, such as painting or landscaping.
Downgrade the Emotional Stake
No question about it: Getting rid of your parents’ home can be a wrenching experience.
Passing on the residence to one child or grandchild raises questions about how to be fair to the others. Even if the property is a vacation home, emotional and financial conflicts can arise when some family members want to use it more than others. Giving or selling the lake house to descendants might be wonderful for the grandchildren who live a couple of hours away, but useless for the ones across the country.
So why keep a home in the family if it will cause unpleasantness?
Think Long and Hard About the Rental Option
If it’s hard to get consensus in your family about what to do with your parents’ home, you could forestall selling the place and rent it out instead, especially if there’s no urgent need to convert the home’s equity to cash.
Renting has a certain appeal right now because home prices are low and rents are high, so there may be an advantage to delaying the sale until the real estate market brightens.
But having been a landlord for nearly 20 years, I want to wave a red flag regarding this option.
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Yes, some people are able to make investment properties profitable. But unless you’re lucky enough to ride a housing bubble, which we’re unlikely to see in the next few years, you need to treat a rental property as a second job to make it pay.
Even then, the money you'd receive might not justify the headaches you’ll endure — late-night calls from tenants, costly gaps between renters, complex tax issues, unexpected repairs and on and on.
I’m not saying you shouldn’t rent your parents’ home under any circumstances. But I would suggest you first look very carefully at the numbers. Talk to rental agents and landlords in the area, as well as an accountant. If turning the home into a rental seems to make economic sense, then make sure there’s someone in the family who is eager — not just willing, but eager — to take on the chore of managing it.
Our parents' home ties up a lot of money and carries a lot of emotional baggage, so it’s not easy for a multigeneration family to agree on what to do with the residence. You’re not likely to find the best solution by hashing it out quickly after Thanksgiving dinner or your mom or dad’s funeral.
Someone in your family needs to take charge — ideally, your parents — and present everyone with a say in the matter based on a set of well-studied options. It’s much easier to discuss selling, renting or upgrading when you all have up-to-date estimates of local home prices, rental rates and improvement costs.
If your family hasn’t had a conversation yet about who that someone will be, have it soon. That alone will save everyone a lot of time and trouble when the inevitable happens.
Whoever winds up leading the charge should prod other family members to be realistic and keep emotions at bay. After all, you’re talking about more than a bunch of two-by-fours and drywall — it's the home that provided great memories for all three tiers of your Sandwich Generation family. Work together and figure it out.