Affording the Dream

Inspection…..passed! The special inspection for my garage conversion is done. Next up, final inspection before closing in with drywall.

Often when looking towards retirement and how we will afford it, pensions and 401k’s come to mind (or RRSP’s for my Canadian friends). What’s the formula? Save enough to be able to take out 4% for living expenses without touching the principal? Something like that, but for me as I drew closer and closer to 65, I realized that maybe I wouldn’t have enough saved to really live the life I wanted in retirement. My family and friends live throughout the world and I wanted to be able to travel (a lot) to see everyone.

You have to start somewhere.

So my plan began with the idea to convert my detached 640 sq. ft. garage to a small rental unit. Rental units are scarce in Santa Rosa and I knew I would have no problem renting, either short term for wine country visitors or long term for singles who are struggling to find affordable housing in this area.

It all started in 2018. I hired an architect to draw up some plans, settled on a 1 bedroom unit and moved forward applying for permits. Nearly a year and thousands of dollars later, I finally had approved plans. However, I probably should have researched more the actual cost of building. Santa Rosa was still recovering from the devastating Tubbs fire of 2017 and rebuilding made work plentiful for contractors and trades people. I was having difficulty finding a contractor who wanted such a small job. The few I found wanted astronomical amounts of money (we’re talking upwards of $250,000, way more than what I had budgeted). Reluctantly, I put my dreams of a rental unit away.

Be open to try again.

Fast forward to 2022. My architects call me and tell me my permits are about to expire. They explain that if I have the slightest thought that I might move forward, it would be cheaper to renew the permits, then reapply later if I changed my mind. Construction costs had decreased but I was now even closer to retirement and was afraid that if I took out a loan to do this, I would never retire trying to pay it back. So I decided to be smart this time around.

I went to an expert, my financial advisor, and asked him to run the numbers. And I was so happy to find out my plan was feasible! I could either live in the unit during retirement and rent the bigger house or rent the unit and remain where I was. The loan would be paid off through rental income and would eventually be extra income to support all my travels.

I also made the decision to be an owner-contractor. Although this takes a lot of time and effort, and means spending hours researching online, it allows me to take control of the contractors/workers I use. It also allows me to control the timeline to keep the progress in line with my finances. This single decision has saved me tens of thousands of dollars by eliminating the “middle man” and has me on track to finish this project for less than half the original 2018 estimate.

Some words of advice.

Although everyone’s priorities are different for retirement, here are some tips from this amateur contractor for creating extra income with a rental unit to support your retirement dreams.

Be brutally honest with yourself and dream big. Include exactly what your dream retirement looks like even if you think it’s out of your reach. You can’t realistically plan for it if you can’t picture it.

Then get expert help. I approached my financial planner, we sat down, ran the numbers and I was surprised to find out my plan might just work. I knew I wouldn’t be able to realistically travel back and forth between Canada and the US without some sort of income over and above my pension and retirement funds.

Don’t be afraid to research and learn. The internet is your best resource.

Word of mouth! Take your time getting estimates. Go with your gut. What feels right is usually just that. My first framer contractor gave an estimate of $56,000 and was recommended by my architects. When meeting him, my gut said NO but I didn’t have the nerve to say it. Luckily he was the one who backed out of our contract when I started to question his work. I moved on to a framer recommended by a co-worker who not only saved me tens of thousands of dollars but was gracious enough to share his knowledge with me.

Be flexible and willing to change course when necessary. When I no longer thought the rental unit was going to work for my extra income in retirement, I went to school and got my real estate license….(but more about that another time).

to this (and continuing).

Lastly, don’t be afraid to try. Whatever your idea is for extra income, often just making the decision to move forward is the hardest part. Unfortunately, you will make mistakes, and may have to change course, but so what?! Eventually you will be enjoying your dream retirement.

Let’s Get Started