California gave us $40,000 to turn our garage into a tiny home. There was a lot of paperwork, but it lets us live next to our grandkids.

• Daniel Romo, 61, and his wife Kristin, 63, got a $40,000 grant from California to build an ADU.
• Securing the money was a complicated process, but they would recommend it to other homeowners.
• One of their daughters and her family moved into the unit. In a few years, they will swap homes.

This as-told-to essay is based on a conversation with Dan and Kristin Romo, homeowners in Whittier, California, who received a $40,000 state grant to turn their garage into an accessory dwelling unit, or ADU. Their daughter, son-in-law, and grandchildren moved in this month. The conversation was edited for length and clarity.

Dan: We live in Whittier in Southern California and we just transformed our garage into an accessory dwelling unit. 

We have three daughters who are 26, 27, and 29. Last year, our oldest daughter and her husband realized that with the cost of living, they wouldn't be able to afford to live in California if they wanted to own a home to raise a family. This March they wound up moving to New Hampshire. Our second daughter had just had her first child. She didn't want to move out of the area. 

After receiving a $40,000 grant from the state and taking out a $200,000 Heloc loan, we converted our garage into a modern apartment that our daughter, son-in-law, and grandchildren just moved into. 

Kristin: They pay us $1,500 per month for rent. They paid that in their prior home, but this is a brand new house. Before, they lived in a 1930s cottage. 

The ADU is a one bedroom. They have two small kids and they plan on growing their family, so they will outgrow the space in a year or two. So then we'll switch places and be 10 feet away.

We realized that we needed supplemental income if we wanted to retire and pay off our mortgage

Dan: We paid $244,000 when we bought our house 20 years ago and I refinanced the mortgage to start my business, so it's even larger than when we bought the house. Last time I looked, our house was valued at $850,000. 

Kristin: It became clear that — at the rate we were going on our mortgage and with the rising cost of living in California — we were going to be working till we're 75. We did not want that.

Dan: My first thought was that we could go ahead and sell the house, and contribute that money towards retirement, and move into a new house. I thought that maybe we could move out of state. But my wife said, "No way."

Kristin: So we were trying to figure out a way to supplement our income.

We discovered the world of ADUs — and that we could get paid to build one on our property 

Dan:  Our pastor told us about some ADU videos on YouTube — Ryan O'Connell's How to ADU channel. And I watched every video he had. It was through Ryan that we found out about the grant. 

Kristin: With that money, It suddenly became very doable. 

Dan: I started crunching the numbers and making drawings. And then I kind of presented it to my wife, who was very reluctant, but willing to at least explore the possibility of doing it. 

Kristin: Not because I didn't think it was a good idea. I just need to see the numbers — and see how we're going to afford it — before I can get excited.

The process to apply for the grant was not easy 

Dan: Last June, I went to the website of CalHFA — the entity that was distributing the funds — only to hit a roadblock. At that time, the only way you could get the grant was you had to go through a state-approved vendor. 

There was only one bank that would allow you to take a second mortgage, which was what I wanted because my interest rate had gone down to 2.8%, and they were pretty unresponsive. 

It didn't seem possible, so I felt like, "Oh, I guess I tried." 

But the state realized there was something wrong with the way the program worked and decided to work with nonprofit agencies to help them distribute the grants. 

I applied for the grant through HPP Cares. And, at first, my application fell through the cracks. But then, finally, I was able to get the grant. I received the money by late October or early November. It was a challenging process.

When I applied for the grant, I had to qualify. We had to have a certain amount of income, then we had to demonstrate that this was our home and primary residence.  Once I submitted that, they also requested tax returns. 

When I was approved for the grant, they required that I submit the contractor's budget and the cost of the construction. Then, they deducted the grant amount from that budget. I had to put the remaining amount in an escrow account, which was something that this state required.

Kristin: When I heard all that, it gave me peace of mind. I felt like this the way that the state was taking care of their money. They were really making sure that people weren't trying to do something underhanded. So, in some ways, I felt protected.

Dan: After the cost of administrative fees, we actually only got around $33,000. I was grateful for that, of course, but the sum of the grant was a little misleading.

It was worth all the work

Dan: The grant helped cut down some of the pre-development costs. It helped pay for the architectural drawings, the permits, the trenching, and demo. It went really fast. The whole process from when we got the money to when our daughter and her family moved in was from November to August.

Kristin: It was finished on a Wednesday and they told us we passed our inspection. Thursday, Friday, and Saturday, our middle daughter and son-in-law and grandson moved in — my daughter's second child was due any day. 

She worked right up until midnight on Saturday moving in, to get everything set, and put away. Then, she went into labor an hour and a half later. They were determined that they were going to bring their daughter home to the ADU, not to our house.

Dan: Getting the grant was challenging, but worth it. I would recommend applying for similar grants when they are available. 

I encourage people to humble themselves and have a growth mindset and open to the possibility of something that is completely foreign.