Ep. 04: – Leveraging Your Home in Retirement

Brighter Wealth Retirement

Intro about the episode:

Hi everyone and welcome to the Brighter Retirement Radio™ Podcast. Leveraging your home in retirement can increase your retirement income, and help your aging parents and children. Brooks Gibbs provides some incredible insight into using your home as a flexible resource to solve several situations that arise during retirement.


>>Devin Peterson: (00:00)

Devin welcomes the listeners to the podcast and introduces himself and the guest for this episode, Brooks Gibbs, who is also his father-in-law. Brooks is a real estate consultant and the president of, I Live in a Bank, which is an ADU Property Solutions Company.

>>Devin Peterson: (00:59)

Devin explains why he likes this topic so much. He explains that the top two assets in your retirement portfolio are typically your market-based retirement assets, which are your IRA and your 401k balances alongside with the equity balance in your home. The equity in your real estate presents a large portion of your retirement assets. And usually, your home is an illiquid asset throughout your retirement. This topic today addresses what you can do in the meantime, before selling, upgrading, downgrading) to maintain that asset as a flexible asset and a resource inside of your retirement.

>>Devin Peterson: (02:02)

Devin explains that Brooks is going to share several ways of how that asset can be used. One of those ways is adding an ADU or an accessory dwelling unit to your primary residence. An ADU is an accessory dwelling unit as defined by a separate living space in or attached to your primary residence. So this could show up as a basement apartment which is a separate living space. It has a separate living entrance and a living space. You can rent it out legally if it’s zoned properly or this could be a separate building on your property that could be an apartment above a garage or in the back of the home that can provide some additional flexibility, whether that be cashflow opportunities, home health care opportunities for an aging parent as well as for yourself or a parenting opportunity which could look like helping children learn responsibility and launch into their own homeownership.

>>Speaker 1: (03:15)

Devin explains it’s extremely interesting to see, particularly in the local market here in Utah, as many of the cities around Utah and Salt Lake County have been changing the ordinances to be able to allow these accessory dwelling units. It’s a growing segment of the market. It’s a growing tool that’s now becoming legally accessible to implement into your retirement income plan. The takeaway was today’s listeners is that there is great wisdom in considering all of your assets while you’re putting together your retirement plan, not just your market-based investment accounts, but sitting down and considering your real estate as a flexible part of how to roll with some of these life experiences whether they’re taking care of an aging parent or an aging spouse, or adding some additional retirement income to your home

>>Devin Peterson: (04:35)

Devin introduces the interview with Brooks.

>>Brooks Gibbs: (04:40)

I’m excited to be here. This is a lot of fun.

>>Devin Peterson: (04:42)

Devin asks Brooks to share a little bit about him for our listeners.

>>Brooks Gibbs: (05:00)

Brooks explains that he was born at an early age. He states he’s had a really great life and lots of experiences in many ways. He’s done things where he’s built radio and TV stations literally all over the world. He has built multiple homes. His life has really been centered around creating things and whenever he does it tends to be on a big scale.

>>Devin Peterson: (05:43)

Devin explains that the listeners of the podcasts are charitable boomers. Devin advises that throughout the interview the listeners will hear Brooks story on allowing and giving an opportunity for these baby boomers to leverage an asset which is their home. It creates some flexibility in their retirement that typically isn’t seen. Most retirees have two major assets, which are your home, which is the equity in your home and then a 401k or retirement balances. So this is a way the listeners can start to understand how you open up the value inside of your real estate to create a flexible asset to use in more ways than you might think. Devin asks Brooks to explain the concept called an accessory dwelling unit and why does it relate here?

>>Brooks Gibbs: (06:51)

Brooks describes the accessory dwelling unit as the term that cities and states have given to second living space on your existing property. In the past, it’s been called a lockout apartment or a basement apartment or maybe it’s an apartment that’s over the garage. It’s a second living space that is auxiliary to the primary space. In other words, you have your home, which is anywhere from 1800 to 5,000 square feet. And then there’s another living space that is a completely independent living space with the kitchen, bathroom, and everything. That’s usually anywhere from 25 to 30% the size of your main living house and it’s now available to be rented out as an income property. And what’s changed in the States is and in the state of Utah especially, is that cities are now basically allowing that and actually encouraging that to happen, which they have not been doing for the past 50 to 60 years.

>>Brooks Gibbs: (08:02)

Brooks advises to think of the history of what’s going on and look back a hundred years ago, land was readily available everywhere. And after world war two, basically we started to create these suburbia’s which were concentrations where people came to live and work. And we started creating those concentrated areas. Brooks gives an example of this as Wasatch Front, which is concentrated up and down the Wasatch Front along the corridor of I-15, ranging from about Spanish fork on up to Ogden. It’s basically one big city and that’s where the central population is. And 50 years ago we had lots of land to build out housing. And today we don’t all have that concentrated area that’s within a 50-mile radius of there is basically been filled in. And so we are now facing a very large housing crisis.

>>Brooks Gibbs: (08:54)

Brooks explains 50 years ago the goal of the family was to have a nice home with a big lot and a garden and maybe a chicken coop and things in the back. So most of the lots were a size of a quarter acre or larger. Now lots are much smaller and the homes are going on there. But the cities that are recognizing, we don’t want to just convert our nice cities into just high rise apartments. So they’re looking for alternative housing options and creating an ADU or second living space on your existing property is a prime way to do that.

>>Devin Peterson: (09:29)

Devin simplifies what Brooks has explained so far. Devin advised that what he hears that might be going on in the mind of the listeners, is now knowing that one of their primary assets is their home. Some of these baby boomers have lived in their home, they raised their families, and almost, or they are empty nesters. They have this quarter acre lot, which is a beautiful home, but they have a big backyard. Devin explains that what Brooks is talking about is maintaining at your residence that you’ve lived in for 20 to 30 years, where you’re comfortable with, where you know your neighbors, your community and somehow creating that environment to be more flexible.

>>Brooks Gibbs: (10:23)

Brooks agrees and shares what his experience was because he is right in the category of being about being 60 years old. He states he has gone through many transitions and one of the biggest and toughest transitions was in 2008 when the economy went down. And he watched his 401k and the business he was building at that time basically go out of business and he had to basically do the restart. He restarted by getting a career and finding a really great job. He was working for a company and started rebuilding his retirement account. But in those eight or nine years, he couldn’t recoup what he had. And then at the age of 58, he got laid off and had to figure out what to do next because at 58 he had to try and start a new career at 58 and compete in a real tough marketplace.

>>Brooks Gibbs: (11:22)

Brooks then realized he did not have a retirement plan that was going to work for in the long run and he needed to find something that would passively give him an income where he didn’t have to work 60 hours a week to make that happen. So he started looking at what’s the biggest asset that he has in his life and it was his property and home. He then asked himself, how can I use that to help generate an income? He went down to his local city and asked, what’s the city’s stance on my creating like a basement apartment in my home? And they basically said, no, you cannot do that. The city planner then said, “Oh, we just passed an ordinance for the city called an Accessory Dwelling Unit Ordinance that now allows you to create a second living space on your property and rent it out.”

>>Brooks Gibbs: (12:15)

Brooks explains he started looking into it to figure out what that would be and what he recognized is that in the city of Bountiful, a single bedroom apartment of about 500 to 600 square feet, rents for $1,000 a month and thought how that would be a good retirement especially for space in the house that he doesn’t really use or need. He then started planning how to make this happen. After six months of working on it he decided rather than having someone live in his basement, he had an old single car garage that was built 80 years ago that was falling down. He decided if he tore that down and put a new garage in with an apartment above it, he would have a rentable income, but wouldn’t have somebody live in his basement. He still has his privacy. And because of the size of it, he’s executing about $1,300 a month out of that right now.

>>Brooks Gibbs: (14:00)

Brooks explains an ADU can be considered an apartment, an accessory dwelling, which is a part of your existing house. It’s in your primary ring. It can be an attachment, which might be an addition to the house. It could be detached, which is a completely separate building that’s a part of your house. And it could be like the garage might be the detached with it’s sitting above. So you’ve got a lot of options as to how you do that.

>>Devin Peterson: (14:27)

Devin asks Brooks their listeners would start if an ADU is something they are considering, where do they start?

>>Brooks Gibbs: (14:55)

Brooks explains you have to start with figuring out your goal and plan and plan over the long run? He explains that you’re really going to build and create something that you’re going to live with for many years. Probably 10, 15, 20 could it be 30 years or more. He advised that this is also something that probably could have a great possibility of being turned over to your family after you’ve gone. He explains to really kind of look at how this would be utilized over those years and create a plan and then design towards that which is a lot of what he does.

>>Devin Peterson: (15:47)

Devin explains what he really feels like is valuable is understanding how to use your home as a goal-driven tool, driving towards what your goals or special circumstances might be. He advised that as we all move into retirement we are all very different.  We have different family circumstances, different financial situations, different expenses, needs and wants to be met different health concerns. Devin advised that the reason he loves this conversation and leveraging some of our real estate to help us move through and into retirement is there’s a lot of different ways you can use an accessory dwelling and asks Brooks to share some way you can use an ADU.

>>Brooks Gibbs: (16:43)

Brooks shares a story that happened with one of his friends that he grew up with. His friends leveraged an ADU over a 30 year period in some magnificent ways. The first thing that happened was that his friend’s grandparents were getting to the point that they couldn’t care for themselves anymore in their own homes. And so the family said, well, what can we do? We can’t put them into a retirement center. We don’t have the money to do that. So what they did was his grandparents sold their house and financed building an apartment that was attached to his home and his parents then took care of his grandparents for probably about eight years, through that part of the life, which basically meant that they didn’t need full-time caregiving. They just needed someone to assist them with things. They were around friends and family and their years in their latter years were really good years and it made it very great for the family when they passed on, but the apartment remained. Their youngest daughter got married and couldn’t afford to buy a house and so the parents said, why don’t you move into the apartment, pay us some rent for that, a fair rent. The parents took part of that money that they were paying in rent and they put it into a savings account and they said to their daughter and their new son in law, you save some money as much as you can while you’re living here and when you get ready and find a house, we’ll match what you’ve saved up, what they were currently saving from the rent. Brooks advised that literally doubled what they had for a down payment to purchase a home. They were able to find a home and move out and have that home. So it benefited their daughter at that point. They then just rented it to people around who came in and they were taking the money and putting it into their retirement planning accounts. And they did that for probably 15 or more years where they just rented it out and had that income. They went on a mission and so they rented out two areas. They came back and when they came back they decided we don’t have a family that needs this big house. They were living in about a 3000 square foot home and decided to move into the apartment.

>>Brooks Gibbs: (19:05)

Brooks explains they decided to downsize and rent the house out. And so they rented the main house out for quite a bit more than they could the apartment while they still stayed there. Same neighborhood, their same friends, the same people that they went to their religious association with. Everything remained the same. And now they’re in their mid-eighties, and one of their family members has moved their family back into the main house and is acting as the caregiver for them. When they pass away, the property will go to the family with the value that’s in there. So over that 20 to 30 year period, this has probably been worth well over three-quarters of a million dollars of not only income generation, but savings and caring for family and doing so many things. Brooks states that what is so powerful about this.

>>Devin Peterson: (19:50)

Devin states here are three things that he pulled out of that story that he wants to point out for the listeners. At the very beginning, Brooks shared that they built that apartment with the ability to keep their parents close by and take care of them. A big concern for folks moving into retirement is, how can we not only plan for our own longterm care expenses, but they also have aging parents that they want to be able to be around them and take care of them as well. So this type of approach, in your friend’s family circumstances, as they were able to take care of their mom and dad.  Keep them close and then in their older age, they were able to have some of their family stay close by and take care of them. So they were able to assist their children too. The second one Devin heard is you’re able to be a parent in a unique way. So be able to have a separate living space that if you have a child that needs a little bit of help, creating a space where your children are close by, but they’re allowed to have some sort of independence there.

>>Devin Peterson: (21:22)

Devin advised that Brooks shared a great example of a teaching moment towards some savings. You encourage your children to save towards a down payment on their own home while still paying you rent to be there. And then the third thing that Devin heard was what we all want in retirement was another income source. Brooks mentioned first that they rented out that apartment and then they went on a service mission to rent it out both the home and the apartment and then in their later years lived in the smaller apartment and then rented out the main home. So creating a space again where income is flexible, it’s not always black and white and just relying on income from your pension and your social security. But it’s the second line or third line of income when you need it.

>>Brooks Gibbs: (22:48)

Brooks explains what’s really interesting is that some families would love to have their parents with them but don’t know how they can take care of them cause they work a full-time job. There are a significant amount of resources to have outside services come in and help take care of getting your parents up and going in the morning, to help take care of their hygienic needs, to help them with food, planning to help them and taking them to places.

>>Devin Peterson: (23:24)

Devin states the highlight of the conversation is the three things he states above which are the flexibility of using your real estate, either adding onto it through another building or improving your current building by putting basement apartment in there.

>>Devin Peterson: (23:48)

Devin asks Brooks if he knows any resources or has any resources to start pointing listeners who are interested in this in the right direction to understanding this and how this might fit in their city when it comes to goal-centered planning as this is a goal-centered tool and they start to work with their advisor or have conversations with their spouse.

>>Brooks Gibbs: (24:18)

Brooks explains you can go to a resource like himself but you can start looking up a lot of this on your own. One of the very first things you would want to do is contact your city planning commission or the planning manager. And if you go to your city’s website, just look under the zoning and planning. You’ll find who the planning department is and who manages that. Give them a call and ask them what is the city’s current regulations around accessory dwelling units. And they’ll happily tell you what’s going on. And most of the cities have adopted some type of ordinance if not, they’re debating it at this point and adding it because it is such a major issue in the state for housing. And it is one of many solutions that the cities are having to wrestle with to figure out how to create affordable housing, more housing and a way to take care of their, their, their population needs.

>>Brooks Gibbs: (25:19)

Brooks advises if you call up now and find out that your city does not have that, that doesn’t mean that within the year or a year and a half that they won’t. He gives us an example in places where ADU’s have taken off in California and Oregon. They are basically rapidly changing those yearly with what’s going on with them. So, even though it may not be something that’s available in your community today, a year from now, it might be, and it could take you a year just to kind of plan what you want to do to put that together because you literally are building a home. And most homes that you are building take a while to plan, to prepare all of the documentation that you’ll need to get a building permit from the city to get it turned in, to get it financed and get all that. It could take you six months to get through that process. So just because the city doesn’t have it today doesn’t mean you can’t start doing the planning

>>Devin Peterson: (26:19)

Devin asks Brooks if the genesis of him starting, I Live in a Bank, was the individual experience he had of going down to the city asking about whether or not you could finish a basement and it being a new ordinance.

>>Brooks Gibbs: (26:41)

Brooks explains that was the beginning because what he recognized is he was scared for his future. He explained if they had any type of even just a minor bump in the road, they could be in trouble very quickly and might lose their biggest asset, their home. When he found that he could create essentially a nest second space that would literally pay his monthly mortgage, he figured if he got his mortgage taken care of, his house, and everything else, he can figure out how to make all of the rest happen.

>>Devin Peterson: (27:42)

Devin asks brooks to share a little bit about how he got that relief of maybe an ADU even paying his primary mortgage.

>>Brooks Gibbs: (27:54)

Brooks explains he was hoping that it would be something that would offset his expense. So he started going through the whole scenario of what he would do, and decided to get a brand new two-car garage with an apartment above it was his next step.

>>Brooks Gibbs: (28:16)

Brooks explains he went and looked for a second mortgage and could have gotten a second mortgage because of the equity he had in the house. But he would have been paying his primary loan and a second mortgage, which would have been about $1,600. He then thought if I were to refinance my house and put it all into a new 30-year mortgage, we were at 22 years on this primary mortgage, what would my payments be? And for him to take enough out of his equity to build the building and refinance at 30 years, his payments still remained at 1100 a month. So in effect, he created a mortgage-free environment with not really spending any more than maybe I about $1,500 to get through the loan process of getting it financed and everything else. That was about his out of pocket expense to get his mortgage taken care of for the rest of his life.

>>Devin Peterson: (29:34)

Devin explains that for people like the listeners that still have 10 years until they retire, they’re worried about preparing for retirement and the idea of having this accessory dwelling unit or leveraging the real estate before they retire, that gives them an opportunity to not have a mortgage payment or have the rental pay for their mortgage all the way up into until they retire.

>>Brooks Gibbs: (30:05)

Brooks agrees and advises now his plan personally with him and his wife is that because they’re essentially replacing, what they’re doing in their mortgage payment right now is taking part in that and actually paying their mortgage down quicker and putting some of it into a retirement plan. They’re building a retirement plan and shrinking debt very quickly, but they haven’t changed anything in their monthly expense.

>>Devin Peterson: (31:27)

Devin advises that based off of the experience Brooks he started his company called, I Live in a Bank. Devin asks Brooks to share more about, I Live in a Bank.

>>Brooks Gibbs: (32:15)

Brooks advises that he got excited because he realized his home literally is a bank that can start paying him dividends. And that’s why he came up with the name. What he recognized is that an ADU is really a tool. It’s not the end goal. It’s a tool that you are using to help you manage your future, your finances, and your family. And so as a company, that’s really what they focus on is how they can help you create a longterm plan using an accessory dwelling unit as a tool to assist you with your family, your future, and your finances. And in doing that, what they do is Brooks assembles a team of people, much like Devin to say, okay, what would you like to accomplish and what are the things that you’re worried about over the next 30 years in your family situation and in your financial situation? And so that you could kind of work through that. And that means one of the things that he really gets concerned about is many people who would put a rental property on their house that have never been a landlord before.

>>Devin Peterson: (33:31)

Devin states that as a retirement consultant as he meets with families and they bring up the idea that they want to get into real estate, once they retire, maybe taking the lump sum of their pension or their 401k and put it into real estate, buying a few rental properties, that’s absolutely an option. He explains his direction is usually, well, if you haven’t ever been a landlord before, it’s maybe not the best time to step into that role because it’s not as easy as a lot of folks think.

>>Brooks Gibbs: (34:11)

Brooks explains that one of the things that she does with anybody he works with putting in an accessory dwelling unit is his company actually pays for the first year of property management so that you can have a property manager who will actually work you through that process of being a landlord and take care of all of those headaches for you.

>>Brooks Gibbs: (34:54)

Brooks explains the two first biggest headaches are marketing your property so that you can get potential renters who are going to be there and then screening the rental applicants to ensure they will be a good applicant. Who’s got a good payment history and a good history and a good job are things that he will take care of. And then, the third thing that they provide is they provide a great contract or lease that the tenant knows exactly what their responsibilities are and then they provide prompt management of that contract so that when a tenant becomes in default, it’s dealt with immediately and therefore if there is a problem that’s dealt with, and the transition happens very quickly so that your money flow is not interrupted.

>>Devin Peterson: (35:41)

Devin explains that one of the main hassles that come to his mind when adding a dwelling unit to their basement or to the side or the back of their house is maintaining your own privacy, your own space. Having a property manager that takes care of that should take a large burden off the owners’ shoulders.

>>Brooks Gibbs: (36:18)

Brooks explains it is a big difference because another thing you need to consider is whoever is basically there is your neighbor, a very close neighbor and you will have a relationship with them. And what a property manager has is it could have put up that wall that we can have a relationship, but when it comes to the apartment, the rent and things that are going on, you get to talk to the property management company because they’re under contract with them. And so they deal with that. He explains as you get older, you may want to travel more and you don’t want to get a call while you’re in the middle of a vacation saying, Oh, the sink is leaking in the bathroom and I need to have it fixed, and they’re expecting you to come fix that. He advises that he go to the property manager. The property manager contacts you and says, you know, we’ve got a reserve fund to take care of that. I’ll get it taken care of in the morning. You go on with your vacation, you don’t worry about it. And what little expense that you pay for that property management is huge in the personal relief and ability to enjoy your life as opposed to being tied to managing that property.

>>Devin Peterson: (37:21)

Devin states one of the benefits of working with I Live in a Bank is helping them connect them to a property manager and asked Brooks if they help them see what type of design might work for their house?

>>Brooks Gibbs: (37:43)

Brooks states he actually has homes that are predesigned, but they can do a custom design. He advises that when it comes to privacy, how you place the ADU if it’s an external one and just a few simple little tricks that you do in some of your landscaping really creates two separate private places and can create a great amount of privacy and how you live, which is really important. You still want to have your own backyard and you’d like them to have their backyard, but you’d like it to know this is mine and that’s yours. And then just some strategically placed bushes and trees and short fences make a huge difference in the privacy of how that works. Even simple things like a breezeway roof between the two buildings that have a partitioning in it that is semi-invisible so that it gives it private entrance. But now you’ve got a covered patio that was paid for by putting in your ADU.

>>Brooks Gibbs: (39:00)

Brooks explains that you are also creating an income-generating property, you have now created a business. You have a business because you’ve got money that’s now coming into you as a business. And there are a lot of people out there who have never actually owned or operated a business. They’ve worked great jobs and had great careers and they’ve been employees of those places. But there are some huge benefits of being a business in that you’d now have some tax advantages, but you have no idea what those are and you don’t really know how to account for it. With their team, they bring in a partner to help advise on how to set up and run this as a business so that when it comes time to take care of your taxes, you’re not in that big sweat. Am I going to get in trouble? What’s going to happen with this? What can I claim was income? What can I claim as expenses? That is a huge relief that you need to also have guide you through this.

>>Brooks Gibbs: (40:31)

Brooks explains having a business gives you a way of being able to get some great tax advantages and tax benefits because your expenses become a write off of what’s coming in.

>>Brooks Gibbs: (41:30)

Brooks explains more about his website, Iliveinabank.com. Brooks advises he tried to make the website an educational website where there are frequently asked questions about these very certain things. And if there’s not an answer to that, email in the question and he will put the answer and post it. He states they haven’t even touched on some of the things that this could be used to help solve a problem with parents who have aged basically to the point that they can’t live in their house anymore because they are in a wheelchair or a walker, yet, they refuse to leave their home because that’s where their 30-year friends and neighbors and everything is. And I can’t blame them. And yet they will literally be miserable in their physical environment to remain happy in their emotional environment. And if you were to just consider that, well what if we were to build a new ADU in their backyard that they could live in that is already accessible for wheelchairs and walkers and being able to take care of them and then move them into that, they’re still with their neighbors and friends, clear the house out and rent the house out and offset their retirement. What a huge benefit that could be. Also, Brooks states that that asset, when it comes to the end, it now can be transferred over to the family as an income-generating asset.

>>Devin Peterson: (42:57)

Devin explains that he loves the last point because investing in improving your property is very different than the quote on quote investing. Building an additional building on your home or building a space in your basement, it’s adding value to an asset that is going to remain within your estate or within your family and be passed on to the next generation. Whether that’s additional income-producing assets that the children can use or whether that home or homes in the case that you have two separate spaces is sold at a higher value. So there are so many applicable principles in there that are building towards a bigger and better brighter.

>>Brooks Gibbs: (43:57)

Brooks advises that his advice isn’t for everybody, but it certainly is worth considering as an option to look at because over the next little while for him at 60 years old, he’s got major changes coming up in his life, financially, physically, emotionally, and he looked at this as being a huge tool in being able to allow him to really move through those challenges much more smoothly.

>>Devin Peterson: (44:26)

Devin thanks Brooks for sharing and asks him, what makes Brooks Gibbs so alive?

>>Brooks Gibbs: (44:51)

Brooks explains that he would have answered this question much differently 10 years ago because the gift of aging is perspective. He says what he has really come to realize is that his life will come to an end and he will leave all of the physical things that he’s done in this life behind. He states that what he will not leave behind is all of the things that he did to help others in their journey. And so through the last 20 years of his life, he’s really tried to refocus and find what brings him the greatest joy is knowing that he’s making a difference in somebody else’s life. He explains that with I Live in a Bank he is able to accomplish some of the financial goals that he wants for himself, but more importantly, he’s able to give an opportunity and solution to people who truly feel lost and it can make a huge difference for them and their family over the next 20 years.

>>Brooks Gibbs: (46:21)

Brooks explains a little mantra that he came up with for himself which is his circumstance is his teacher. It’s here to teach him something. Who he is is his next choice. And so for anybody out there who’s really struggling in whatever way capacity, whether it’s in their finances or with their family or a job or you know, your circumstances may really be difficult, but they’re only there to give you the opportunity to educate you what’s not working in your life and give you the opportunity to make a new choice and you are your next choice. That’s who you are. Your circumstances are now behind you, what you choose to be and how you choose to deal with them defines who you are.

>>Devin Peterson: (47:24)

Devin thanks Brooks for sharing on the podcast.