It is important to weigh up the accommodation options
Many first-generation, middle to high-income earners in South Africa grapple with the question of how best to support their parents in old age.
A question that often arises in these scenarios is whether to upgrade the parents’ existing property or to build on to the home of the children to accommodate the parents, says Amanda Cuba, co-regional owner and chief operating officer of Re/Max of Southern Africa.
“This decision is not purely financially-based, which makes it one of the hardest to make. Homeowners need to examine both their financial position, as well as their family dynamics so that they can arrive at the best outcome for everyone.”
Individual family situations aside, there will be financial wins and losses in both scenarios.
“Home-owning children who choose to upgrade their parent’s home will increase the value of the property.
“However, homeowners must remember the value of a home is capped, depending on the location and desirability of the suburb. They need to be careful not to over-invest when renovating a property.”
On the other hand, Cuba says children who instead choose to sell their parents’ home to use the money to build a space for their parents on their own home, will lose the option of having their parent’s property as a source of rental income.
“If you upgrade your parents’ home, you could always have your parents move in with you temporarily while you let their home as an extra source of income in tough economic times.
“For those who can afford to do both, you could keep your parent’s property as a source of rental income and build on to your home, so there is a comfortable place for the parents to stay.”
Choosing to build on to your existing property is often the better financial option when the parents do not own their property or if the children are helping their parents pay off their home loan.
Cuba says adding a new space to the home will increase the property’s value.
Should your living situation later change, the extra space could be rented out either as an Airbnb or full-time rental.
“There is no easy answer to this dilemma, as each homeowner’s situation will be different.”