***update #2 in post #1*** 401k loan being considered in lieu of bridge loan. Please let me know your thoughts

[DCLMP]

If they are in the 22% tax bracket and took out a $50,000 loan without repaying it, they would owe $11,000 in taxes. It may not be the end of the world to you, but its a lot of money to some people.

You should probably put aside 11k from that loan for taxes just in case. No one said to take a loan without using some common sense. I'm going to assume they aren't stupid.

 

[Mackenzie Click-Mickelson]

very true-there are so many unknowns until you start opening walls it's a time consuming gamble to renovate. I have seen some opt to go in a different direction though. with more cities allowing ADU's on single family home lots people are evaluating their real needs for 'more space' and finding that redefining existing space by moving some needs to an alternate location on-site fits the bill. with some it's b/c their jobs have become remote and existing space has been allocated to work, up here we saw a decent percentage of parents finding their kids did better with on-line vs. in person instruction so they've opted to enroll them in the public virtual schools and have had to carve out 'classroom space', with others it's a desire to have more dedicated 'chill space'. they end up doing an ADU for less than the cost of upsizing (if they can even find anything to upsize to) and it becomes the home office, classroom, family space or whatever they desire.

I was talking to my husband about that a day or so ago. Thinking about how house plans are made for today for instance formal dining rooms are less common than they were previously. Speaking about new builds we we were looking at house plans it wasn't super common but still done where that dining room was the office, most of the time in that case it was the office though meaning it was not coded as a bedroom. What was more common is called a "flex room" oftentimes it was being used/staged as the office but technically was also a bedroom. Our office is technically our 5th bedroom and located on the main level. You net living space but as a multi-purpose space that can be shifted to different needs over time.

In my county you cannot have two addresses on one plot of land unless it's converted to a multi-residence like a duplex but then you will run into neighborhood rules, city rules including zoning and more so you really can't add anything that would cause an address to be needed. Specific to my neighborhood you cannot have separate structures either but that's an HOA thing. There's definitely rules regarding making living space if it's separated from the main house but I don't know all the cities rules around that.

But much of that is dependent on how the house is laid out with to begin with as well as the plot of land.

If talking about converting existing space you will still run into all the other issues I brought up, you're still adding living square footage and depending on the regulations if you open walls it may require the whole house or a significant amount to be brought up to code (sometimes just all the electrical but yeah). But I also think the discussion of what you're talking about is something that would have to be clarified by the people (which for the OP's family it sounds like a moot point anyhow) as in are they talking about just shifting the space to create for example a play area or a space better used as a great/family room carved out from a not well-utilized existing space (the OP's adult child has young children) or were they needing a bedroom and potentially another bathroom.

My mom's house built in the 1960s is a 3 bedroom 2 bath bi-level home (county considers the family room a partially finished basement but it's at the same level as the garage entry and the windows for that family room are at ground level). I honestly don't know how you could add square footage by an addition just the way it is laid out. It's largely been untouched since the '60s (wood paneling galore in the basement lol) and she's only done one bathroom renovation about 15+ years ago and then a few years ago redid her kitchen but her kitchen was not brought to studs it was mainly new appliances, repaint the existing cabinets and she tore out an old L-shaped pantry/seating bench combo. Unfortunately her handy man who did it caused a large tripping hazard by not properly adjusting the floor height differences between the kitchen and the kitchen eating area but I digress.

In any case the only place she can create a bedroom with the existing house is in the unfinished portion of the basement. She cannot legally do that because she only has window wells. In order for there to be living space there (bedroom or otherwise) she must have an egress window large enough for a firefighter to come through with their equipment. Our basement (and any new-ish home with a basement around here) is built that way because it's code, that's where our 6th bedroom is planned for whenever we finish the basement plus the 5th bathroom would be down there as well. So to make that possible for my mom she now needs to have the foundation walls excavated enough and an egress window framed out for it plus the window and the steps up. She only has a one car garage too. And the main level where you enter the front door is where the living room, kitchen and kitchen eating is at. You really can't just put up walls to create separated space plus there's load bearing partial wall between the kitchen and the living room.

In our house we had talked about adding about a foot wider in our bedroom but it was already slightly cantilevered and the roof trusses would have to be custom at that point; we declined that. However we were able to bump out our kitchen dining area by a foot and it was okay to be cantilevered but it was being supported by the foundation below. We wouldn't have had the money to do it but I had thought if I did I would have liked to have an all-seasons room and built above it a sitting area in the main bedroom; most people just do a covered patio without enclosing it, stills adds a decent amount I think if we had done that it would have been $6k back then to just do a covered patio, we have enough shade so we didn't technically need it. But that all-seasons room would have added some additional space for spreading out (some people just do 3 season room too).

 

[tvguy]

You'd need to look at it from what the previous posters were suggesting which was to just renovate the existing house to make more adequate room for the family with young kids. That is also why I put in the description extensive enough.

Many houses are expensive here relative over time and the area, I believe the median sale price for homes last year in my county was $500K. (pre-pandemic it was like 200-300K) But when you're talking about the concept of "just renovate the existing home" you miss a ton of things that can crop up from permitting, size restrictions (such as how close to the property line you can be or city restrictions or even HOA restrictions these are general ideas but all exist within places in my metro), lumber costs (which are better than the height of the pandemic but still expensive), costs of construction crews and even getting them to begin with, housing costs of where you'll live during this renovation (which adding on square footage probably means the existing house would be a mess especially for a family with young kids), storage costs for where your stuff will go during this renovation, then there's bringing up to code your house if it's old enough and even if it isn't such as HVAC system minimum requirements have changed since our house was built just 10 years ago for example, then there's purchasing of things being used for the added square footage and more. Then there's if something crops up during the renovation such as structural issues or in the case of my husband's coworkers their existing water supply was not large enough (according to the city) for the added addition or my friend who now has to completely redo two bathrooms due to a slow leak that damaged the subfloor.

But we all know you're in CA and in CA housing stuff is delusional compared to elsewhere plus we're all very aware of how your property tax situation works which is abnormal as well. I'm not suggesting that it's cheaper for me personally to go out and buy the same house or larger than what I currently have because my house was built in 2014 so it's new enough and has plenty of space with 5 bedrooms, but once you start getting decades older the chance of running into issues that balloon the project cost to just add square footage in you're often just better off buying a house that fits your needs to begin with because there's a ton of unknowns and a long schedule to make an existing home work. There's a bit of uniqueness for some still under low interest rates which may offset that.

Zoning can be interesting. We added 16 feet to the back of our house, to 24 feet from the rear property, but zoning allows you to go within 10 feet. However my mom's neighbor wanted to add on to their house and go within 5 feet of the property line. There is a process for getting exemptions to zoning laws, so those are not set in stone. All three adjoining neighbors had to approve. My mom had me vote for her, because she knew she would never be selling the house in her lifetime, and it will only impact me. The family had one of their daughter's write an essay with the application explaining why she and her sister "needed this family room to have a place to play". It made me laugh. Previous owners had kids I played with and I was in that house frequently over the years, and it HAD a family room back then. It had been added onto 4 TIMES since I had been there, and this would be the fifth. Not sure where the family room went as it expanded from 2,000 square feet to 3,300 square feet but I did not object and it now has ANOTHER family room and is 3,800 square feet. Looking now on zillow, it appears what had been the family room had become the casual dining area with a breakfast area. Oh, it was next to the formal dining room.

 

[tvguy]

If they don't pay it back immediately they will owe the tax. Not the end of the world. I'm not sure how it's worse than taking out any other kind of loan if you need to take a loan. If you lose your job you are going to be in world of hurt anyway.

If you lose your job a 401k loan just makes it worse. No possibility of deferment like with other types of loans.

 

[JBRB828]

I am no expert, but my daughter and son in law were in the same situation and we told a parent may "gift" the money to a child, it can't be a loan.

We gifted our son and DIL 8 years ago $15,000 each, that was the max allowed. Plus, they used what they had to add to it.
They live on Long Island and homes are very expensive.

 

[DCLMP]

If you lose your job a 401k loan just makes it worse. No possibility of deferment like with other types of loans.

You can defer a 401k loan.

 

[tvguy]

You can defer a 401k loan.

Only if you take a leave of absence. Not if you are laid off or quit.

 

[Mackenzie Click-Mickelson]

Zoning can be interesting. We added 16 feet to the back of our house, to 24 feet from the rear property, but zoning allows you to go within 10 feet. However my mom's neighbor wanted to add on to their house and go within 5 feet of the property line. There is a process for getting exemptions to zoning laws, so those are not set in stone. All three adjoining neighbors had to approve. My mom had me vote for her, because she knew she would never be selling the house in her lifetime, and it will only impact me. The family had one of their daughter's write an essay with the application explaining why she and her sister "needed this family room to have a place to play". It made me laugh. Previous owners had kids I played with and I was in that house frequently over the years, and it HAD a family room back then. It had been added onto 4 TIMES since I had been there, and this would be the fifth. Not sure where the family room went as it expanded from 2,000 square feet to 3,300 square feet but I did not object and it now has ANOTHER family room and is 3,800 square feet. Looking now on zillow, it appears what had been the family room had become the casual dining area with a breakfast area. Oh, it was next to the formal dining room.

Our city rules are within 6 feet IIRC of the property line for your residence, sheds and such I doubt that's part of it. We're close to that on the one side and not as bad on the other but we could build to the back of the house. The neighbor next to us is close to his property line but we have plenty of space between us still, but expanding outwards would create a big issue in that respects. I've not heard of people really getting exemptions here in places that have rules the distance to the property line. My husband's apartment in Naples Island neighborhood in CA when he was there on his field assignment, the bathroom window of his tiny apartment if you reached out of it you touched the home (and I mean home not another apartment building) next to it, the rules are there to avoid those kind of areas.

There is one city here that is having a lot of existing residents get upset. It's a city where you have smaller, quaint homes that aren't tall and what you've been having is people (usually investors) buying up those homes bulldozing them and building big homes that are very out of character for the city and far too close to the property lines and other homes, the city did end up listening to the citizens and created stricter bylaws and enforced existing ones on a stricter level. My aunt's neighborhood close to that city has been having the same issue but they are not quite as "same character of homes throughout the city" type place as the other one was. They have this issue in other places around the nation but the city here it's really part of the city's whole character in terms of residential homes rather than pockets of homes built in a certain time period.

The more ironic thing about your description of the neighbor of your mom it's part of the very complaints regarding housing options out there, it takes a home a certain group of people could have purchased (not a small but good sized home) turning it into a home that an entirely different group of people could purchase. People complain about lack of starter homes or more modest in size homes but if enough are being added onto significantly it's no longer a starter home in size and usage. Going from 2,000 to 3,800 is in a different bracket of homes for sure and who knows what it started before getting to 2,000 sq feet (assuming it was smaller).

 

[clh2]

Just a quick update, my daughter and son-in-law submitted an offer today, that expires tonight. They went over asking, with no contingencies. There was at least 1 other offer presented. My daughter will not participate in a bidding war-i wonder who she gets that from If this offer is accepted…they will be going the 401k loan route.


Thanks everyone for your thoughts on this question!

 

[tvguy]

Our city rules are within 6 feet IIRC of the property line for your residence, sheds and such I doubt that's part of it. We're close to that on the one side and not as bad on the other but we could build to the back of the house. The neighbor next to us is close to his property line but we have plenty of space between us still, but expanding outwards would create a big issue in that respects. I've not heard of people really getting exemptions here in places that have rules the distance to the property line. My husband's apartment in Naples Island neighborhood in CA when he was there on his field assignment, the bathroom window of his tiny apartment if you reached out of it you touched the home (and I mean home not another apartment building) next to it, the rules are there to avoid those kind of areas.

There is one city here that is having a lot of existing residents get upset. It's a city where you have smaller, quaint homes that aren't tall and what you've been having is people (usually investors) buying up those homes bulldozing them and building big homes that are very out of character for the city and far too close to the property lines and other homes, the city did end up listening to the citizens and created stricter bylaws and enforced existing ones on a stricter level. My aunt's neighborhood close to that city has been having the same issue but they are not quite as "same character of homes throughout the city" type place as the other one was. They have this issue in other places around the nation but the city here it's really part of the city's whole character in terms of residential homes rather than pockets of homes built in a certain time period.

The more ironic thing about your description of the neighbor of your mom it's part of the very complaints regarding housing options out there, it takes a home a certain group of people could have purchased (not a small but good sized home) turning it into a home that an entirely different group of people could purchase. People complain about lack of starter homes or more modest in size homes but if enough are being added onto significantly it's no longer a starter home in size and usage. Going from 2,000 to 3,800 is in a different bracket of homes for sure and who knows what it started before getting to 2,000 sq feet (assuming it was smaller).

The big push in Sacramento is to increase population density. Several new subdivisions here have no front lawn, the front of the house is set back the width of the sidewalk. The sides of the house are a sidewalk width from the property line on each side, so the houses are about six feet apart. There is an alley on the back, and the garage is on the back of the house. Garbage pickup is done from the alley, not the front of the house.
I used to walk on my lunch break at work, and they built houses like this behind my work, but WITHOUT the alley. The houses have one car garages, but many are 3 bedrooms so there are cars on the street because most folks in a three bedroom house have more than one car. Garbage day was like an obstacle course. God forbid they ever have a fire in there because I'm not sure the fire trucks will be able to get in, they will have to stretch hoses in.

 

[barkley]

Just a quick update, my daughter and son-in-law submitted an offer today, that expires tonight. They went over asking, with no contingencies. There was at least 1 other offer presented. My daughter will not participate in a bidding war-i wonder who she gets that from If this offer is accepted…they will be going the 401k loan route.


Thanks everyone for your thoughts on this question!

thinking good thoughts for her! please let us know what happens.

The big push in Sacramento is to increase population density. Several new subdivisions here have no front lawn, the front of the house is set back the width of the sidewalk. The sides of the house are a sidewalk width from the property line on each side, so the houses are about six feet apart. There is an alley on the back, and the garage is on the back of the house. Garbage pickup is done from the alley, not the front of the house.
I used to walk on my lunch break at work, and they built houses like this behind my work, but WITHOUT the alley. The houses have one car garages, but many are 3 bedrooms so there are cars on the street because most folks in a three bedroom house have more than one car. Garbage day was like an obstacle course. God forbid they ever have a fire in there because I'm not sure the fire trucks will be able to get in, they will have to stretch hoses in.

gotta ask-what are the average lot sizes?

 

[tvguy]

thinking good thoughts for her! please let us know what happens.



gotta ask-what are the average lot sizes?

LOL. I had no idea. The one I found on Zillow for sale. 1,450 square foot, 2 bedroom, 2 bath, 2 story, 2 car attached garage on a 950 SQUARE FOOT lot!

https://www.zillow.com/homedetails/2678-Cleat-Ln-11-Sacramento-CA-95818/240357808_zpid/?

 

[afan]

LOL. I had no idea. The one I found on Zillow for sale. 1,450 square foot, 2 bedroom, 2 bath, 2 story, 2 car attached garage on a 950 SQUARE FOOT lot!

https://www.zillow.com/homedetails/2678-Cleat-Ln-11-Sacramento-CA-95818/240357808_zpid/?

a free standing condo.

They are doing 3-5 bed houses behind us. You get a 2 car garage and the driveway fits 2 cars but there's essentially no yard. A small patch in the front and back, all rock between the houses. No street parking so it'll be interesting to see how that works. Houses are selling slow, which for the Seattle suburbs kind of surprises me.

 

[barkley]

LOL. I had no idea. The one I found on Zillow for sale. 1,450 square foot, 2 bedroom, 2 bath, 2 story, 2 car attached garage on a 950 SQUARE FOOT lot!

https://www.zillow.com/homedetails/2678-Cleat-Ln-11-Sacramento-CA-95818/240357808_zpid/?

that is NUTS! granted, i'm spoiled-2400 sq feet in the middle of 10 acres (and despite my taxed value being a couple of hundred thousand more I STILL pay almost $2k less in property taxes per year). no regrets on getting out of there when we did.

 

[Mackenzie Click-Mickelson]

The big push in Sacramento is to increase population density. Several new subdivisions here have no front lawn, the front of the house is set back the width of the sidewalk. The sides of the house are a sidewalk width from the property line on each side, so the houses are about six feet apart. There is an alley on the back, and the garage is on the back of the house. Garbage pickup is done from the alley, not the front of the house.
I used to walk on my lunch break at work, and they built houses like this behind my work, but WITHOUT the alley. The houses have one car garages, but many are 3 bedrooms so there are cars on the street because most folks in a three bedroom house have more than one car. Garbage day was like an obstacle course. God forbid they ever have a fire in there because I'm not sure the fire trucks will be able to get in, they will have to stretch hoses in.

I saw similar stuff in the area where my husband was living at in CA. It's completely not to my liking at all, no yard, concrete everywhere, sure you had the water on Naples Island itself but it was just so cramped in there. Good point about the fire department I don't know how they make it in those streets with parking of cars on both sides of the street (which was a necessity due to lack of parking options).

 

[tvguy]

I saw similar stuff in the area where my husband was living at in CA. It's completely not to my liking at all, no yard, concrete everywhere, sure you had the water on Naples Island itself but it was just so cramped in there. Good point about the fire department I don't know how they make it in those streets with parking of cars on both sides of the street (which was a necessity due to lack of parking options).

Apartments are being approved with NO parking spaces.
And one apartment complex recently opened near Cal State Sacramento that has just 330 parking spots for between 700-800 residents, and the CITY approved it. https://www.abc10.com/article/news/...king/103-5c5441c2-8aec-4d85-86d1-133d2d4e106a

 

[Mackenzie Click-Mickelson]

Apartments are being approved with NO parking spaces.
And one apartment complex recently opened near Cal State Sacramento that has just 330 parking spots for between 700-800 residents, and the CITY approved it. https://www.abc10.com/article/news/...king/103-5c5441c2-8aec-4d85-86d1-133d2d4e106a

yeah my husband didn't have a parking space, I mean the apartment didn't come with it, it was all shared street parking all fend for yourself. You could pay for the limited carport area but it was full when my husband did his lease plus it was pricey. There were times he had to park a few streets away because that was the closest spot available.

 

[tvguy]

yeah my husband didn't have a parking space, I mean the apartment didn't come with it, it was all shared street parking all fend for yourself. You could pay for the limited carport area but it was full when my husband did his lease plus it was pricey. There were times he had to park a few streets away because that was the closest spot available.

My daughter just moved from an AirBNB type situation into an apartment in Germany. Her new apartment has a parking spot. She doesn't have a car.
However apartments in Germany don't come with any kitchen appliances, renters bring their own. So she had to buy and hookup an IKEA mini sink/counter combo and hook it up. She had to buy a stove, and now has to hire an electrician to hook it up, and a fridge.
Although it is really what most of us would consider a dorm or office fridge. Big fridges aren't the norm in Germany even in homes. People go to the store everyday for the food they will be having for dinner. Well, except Sunday because the stores are all closed.
At least now apartments include the toilet, because it used to be renters had to bring their own toilet too!

 

[barkley]

congrats to your dd op-here's to a speedy sale of their current home

 

[Psymonds]

I am no expert, but my daughter and son in law were in the same situation and we told a parent may "gift" the money to a child, it can't be a loan.

you can do loans but it must meet IRS interest requirements. national family mortgage can faciliate a loan that meets requirements