“Portfolio Diversification”, is typically not a topic covered by General Contractors. I’m not just your normal run of the mill GC, I have been thinking about how, as a home owner, I can increase the value of my home investment, generate additional income in retirement years, and build inheritance wealth for my children. Depending on your location, situation and local permit regulations, you could have a prime property for an ADU (Accessory Dwelling Unit). ADUs also known as Granny Flats, In-Law's Quarters or Secondary Dwellings not only have potential to provide housing for a relative or sick one, but can help diversify your retirement or investment portfolio.
I worked with one gentleman who was interested in creating a community space and rental with a 4 bedroom ADU for four different renters with each tenant having access to a “Common Area” which included the kitchen and dining space. While this particular scenario might not be for everyone, other options include providing a rental space in a College town which is sure to be sought after for new college students. For others you might have a quarter acre lot or larger and could increase your property value as well as create a steady cash flow of income once the investment is paid off.
In thinking about retirement, what is the key? Is it increasing your “cashflow?” As an example if you have $200,000 in the stock market today and you wanted to safely withdraw 4% a year in 8-9 years from today you would end up with end up with $16,000 over that period of time. Additionally this income would be taxable. Let's say you invest $200,000 today in building an ADU and you could get between $1500-$1700 per month in rental income (I used $1,600 for this calculation and assumed a rental increase each year of 3%) your initial $200,000 investment would be paid off in 10 years. After that your income would be more than $24,000 a year to help supplement retirement income and any expenses, incurred on the rental, are tax deductible. On top of all this you have increased your home value by adding the ADU thereby giving you even more income if you decide to sell your home later. In the end it is a win win situation!