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Post: The Big Move: I want to move to Florida to be near my grandchildren. My daughter wants me to build a $150,000 addition to her house. Should I do it?

Dear MarketWatch,

I live in the Chicago area and have recently retired. My daughter and her husband live in Florida. 

My wife and I thought about getting a condo in Florida so that we could be closer to our grandchildren. But the upkeep and the expense of two different residences is not something I care to deal with. 

My daughter suggested we build an addition to her house and use it whenever we visit or live there, if we ever decide to move to Florida. 

I’m willing to pay for the addition, but am not sure if the $100,000 to $150,000 would be considered as a gift that my daughter and her husband will have to report to the Internal Revenue Service, and pay taxes on. 

Also, though I don’t foresee the marriage falling apart. What if it did — and if so, what rights do we have? How would the property be divided?

Family man

The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.

Dear Family Man,

Congrats on your retirement — what a milestone! At this point in your life, I’m sure family is everything. And being able to see your children and grandchildren anytime you want is a priceless luxury.

But you’re right to have such questions about your living arrangements.

The simplest route: Sell your house in Chicago and buy a condo in Florida, but it seems like you’re not keen on that option. So let’s consider your daughter’s suggestion: Building an “addition” to her house.

Is your daughter proposing you build an accessory dwelling unit (ADU)? Or is she thinking of building an extra room?

If it’s the former, which is sometimes known as a granny flat or a backyard house, then yes, you’ll probably trigger taxes, as you’re increasing the property’s value. And that could, as you mention, complicates ownership.

For those unacquainted with this option, an ADU is a smaller property that’s built beside or near the primary residence, and is a great solution to provide affordable housing.

“It’s a single family home on a smaller scale — it’s got a bathroom, it’s got a kitchen, it’s got a bedroom, a living room,” John Geary, co-founder of Abodu, a startup which manufactures ADUs, told MarketWatch. 

“This is a gentle way to add housing supply without changing the fabric of our neighborhoods,” he added. The average size of these units are around 500 square feet, but they can go smaller or bigger, depending on what you need.

But there are some potential complications with that, including zoning laws that may prohibit your daughter from building you one, so be sure to check up on that. 

Renovating your daughter’s home instead

On the other hand, if you’re talking about adding to the home, the cost of renovation in parts of Florida can be as high as $250 per square foot, Justin Pekarek, a broker and owner of Orlando Property Advisors, a boutique firm, told MarketWatch.

Again, as your addition of $100,000 to $150,000 will improve the value of the property, you’re likely to trigger taxes on it. Sorry, but there’s no way around it. Pekarek said that the tax assessor upon closing permits will increase property taxes as the assessed value will increase. 

And your daughter and husband may also need to check in with your Homeowners Association to ensure that the planned renovations are permitted.

If you want to prepare for the possibility that the happy marriage falls apart, Pekarek said things will get a little complicated.

Even if it’s a separate structure attached by some common corridor, it’s still considered one dwelling on a single parcel or a plot of land, Pekarek said. “There is no way to “divide” the property and have two owners unless the title is held in a real-estate trust with no mortgage,” he added.

So going back to my original point: It may be easier to just buy a condo. If you don’t enjoy paperwork and/or if you are risk-averse — as I am — the hassle of going through the renovations seems too much. Plus, if things go south in the marriage, you’re stuck between living there or in Chicago, versus living in your own zen condo.

Plus, “the taxes, the HOA, and insurance on a $150,000 condo are not that high,” Pekarek said. So carefully weigh up both options.

Family is everything. I’m sure the Florida weather is a major plus, considering the freezing Chicago winters. In fact, when looking at all the people on Redfin.com

who are looking to move to Cape Coral, Fla., the top origin destination was Chi-Town, according to this third-quarter report from the real-estate brokerage.

But is it worth going through such a complicated process, and worrying about ownership and taxes on an additional room to your daughter’s home? 

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