Buying Home With Family Members: How to Start

Suppose you're buying a home. And suppose, too, that you have an elderly parent or adult child who'd like to live in your home with you. Why not buy a home together as a family?

If that sounds smart to you, you're not alone.

Multigenerational Living is 'In'

In fact, a recent study by the National Association of Realtors found that 14% of U.S. home purchases last year involved a multigenerational household of adult children, plus parents, grandparents or both.

The multigenerational housing trend isn't new, but it's on the rise. According to a Pew Research analysis of U.S. Census Bureau data, the proportion of 25- to 34-year-olds who live in such households has increased significantly since the Great Recession, to the highest level since the 1950s.

5 Things About Buying a House with Relatives

  • More families are living with more than one generation of adults under one roof.
  • Everyone in the house needs space and privacy.
  • Sometimes you have to be creative to carve out private space.
  • As always, the home's location is important.
  • Involve everyone in the discussion, including siblings who won't live in the house.

John Graham, emeritus professor of marketing and international business at the University of California, Irvine, and co-author of "All in the Family: A Practical Guide to Successful Multigenerational Living," says he isn't surprised.

"A lot of people say financial problems are causing this (trend), but what's really happening is the realization that the best way to get along in life is interdependence with the extended family. We've had a 50-year experiment with the notion of the nuclear family and it's sort of a stupid way to live," Graham says.

Everyone Wants Space, Separation

Multigenerational homebuyers on the hunt for a suitable home need to focus on what their needs are, a list that's likely to involve space and privacy, says Bradley Marshall, a Realtor at Coldwell Banker Residential Brokerage in Irving/Las Colinas, Texas.

Marshall says one of his recent deals involved a multigenerational family who bought a 3,400-square-foot house with two master bedrooms.

"We found a house with a master downstairs and upstairs and both with an en suite bathroom. It was five bedrooms with a study, so plenty of room," he says.

Rather than amenities, the home's layout trumps in such situations, Marshall suggests.

Employing Creativity to Create Space

Karen Straughan, a Realtor with Coldwell Banker Residential Brokerage in Rockwall, Texas, also says multiple bedrooms and bathrooms are crucial, and families will "get real creative" if they can't find a home with the layout they need.

"People are buying a one-story home and putting in a breezeway, giving Mom her separate space, and converting the garage or an outbuilding into her private living quarters," Straughan says. "If there aren't that many bedrooms, they say, 'Can we take this second living area and make it into a bedroom?' It's very important that everyone has their own space."

Place as Vital as Space

Location is important, too, especially if the older generation is still more active than elderly.

"The younger the parent is, the closer to town it seems they want to be," Straughan says. "Dad can get in the car and go to the post office or run to the grocery store. He still has his freedom and feels like he's independent."

Regardless of the home's location or configuration, multigenerational living arrangements don't always work out.

Straughan recalled one multigenerational family that sold a five-bedroom home to another multigenerational family.

"They were moving, and Mom was getting her own home," she says. "They were only there a year. I think it was little too close for comfort."

House Hunting Tips

If you're in the market for a home to share with your adult relatives, here are some tips to make the arrangement work for you -- and them.

  • Open the discussion somewhere other than your home. "A neutral location helps level the hierarchy of the family. The (arrangement) ends up being an exchange of services and assets among adults. It's not a parent-kid thing," Graham says.
  • Include nonresident adults in the discussion. "Siblings get uptight when it looks like one is getting some advantage in a current living or potential inheritance situation. Once you start mixing assets and families, you'd better get everybody involved or there will be a lot of calls to attorneys," Graham says.
  • Treat your parents or children like adults. "Try to get away from the paternalism," Graham suggests.
  • Consider a new home. Some homebuilders have accommodated the multigenerational housing trend by including a so-called accessory apartment with a new house, Graham says. The apartment is intended to house a relative with a separate entrance and separate kitchen and living space. Older homes are less likely to have this layout.
  • Get everyone's ideas on the table. "You might have conflicts while you're discussing and deciding things, but as long as it's a family decision, you won't have as many family explosions or meltdowns later on," Graham says.
  • Find out everyone's must-haves and won't-accepts. "What helps is getting everyone on the same page upfront," Marshall says. "What can you not have? Are you OK with that? What do you really want? Everyone says, no, this won't work."

Copyright 2014, Bankrate Inc.