PROPERTY NEWS - Many first-generation, middle- to high-income earners in South Africa grapple with the question of how best to support their parents, many of who sacrificed everything to ensure that their children would have a better earning potential than they ever could.
One of the questions that tend to arise in these scenarios is whether to upgrade the parents' existing property or to build onto the home of the higher earner to accommodate the parents.
Amanda Cuba, co-regional owner and COO of RE/MAX of Southern Africa, sympathises with homeowners in this position. "This decision is not purely finance-based, which makes it one of the hardest to make.
Homeowners will need to examine both their financial position to discover what they can afford, and their family dynamics, so that they can arrive at the best outcome for everyone involved," says Cuba.
Cuba explains that there will be financial wins and losses in both scenarios. "Homeowners who choose to upgrade their parents' home will be increasing the value of the property. However, homeowners need to consider that the value of a home is capped, depending on the location and desirability of the suburb. They therefore need to be careful not to overinvest when renovating a property."
On the other hand, Cuba says, homeowners who instead choose to sell their parents' home to use the money to build on a space for their parents at their own home, will lose the option of having their parents' property as a source of rental income.
"If you choose to upgrade your parents' home, you could always have your parents move in with you temporarily while you rent out their home as an extra source of income to get through a tough financial season or in case extra income is required to cover the costs of an unforeseen medical emergency (which can occur at any time when parents reach a certain age).
"Those who can afford to do both, could keep their parents' property as a source of rental income and build onto their own home so that there is a comfortable place for the parents to stay," Cuba suggests.
Choosing to build onto your existing property is often the better financial option when the parents do not own their property or if the homeowners are helping their parents pay off their home loan. Cuba explains that adding a new space to the home will increase the property's value.
Should your living situation later change, Cuba says, the space could then 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. However, it could be helpful to speak to a local real estate practitioner to gather some insight into the possible returns for each option. This might help you make a more informed decision when weighing up the pros and cons for each option," Cuba concludes.
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