CONVERTING A GARAGE INTO AN APARTMENT

converting a garage into a studio apartment

As a real estate investor, you want to do everything you can to maximize your property’s cash-flow.  Converting a garage into an apartment can be a great way to do that.

In this post, I’ll share my story how converting a garage into an apartment nearly doubled by income for one of my properties, and I’ll also share a few tips to keep in mind before starting a project like this.

Make sure it’s legal

Before you run out and start buying materials for your garage renovation, you need to verify two things with your local municipality: zoning & occupancy requirements.  

Your rental property is likely already zoned for residential use, but that doesn’t mean it’s zoned for multi-family use.  In some cases, it may not be a lengthy or costly ordeal to get the property rezoned to accommodate you converting a garage into an apartment, but it still needs to be done.

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To get your garage approved as a residential dwelling, you will likely need to have it inspected and approved for residential use.  

Before you begin renovation, though, you need to get a clear understanding of your local building codes to ensure the property inspector will sign off on the project once it’s completed.

Once the inspector approves everything, you will receive a certificate of occupancy which then allows you to use the garage (now apartment) as a separate rental unit.  

Do the costs make sense?

Just like with any renovation project, you want to make sure the costs make business and financial sense.  In order to determine this, you’ll first want to get a feel for what the entire property (not just the garage apartment) will be worth post-renovation.  This is known as after-repair-value (ARV).

A local real estate agent can do what’s called a comparative-market-analysis (CMA) to help you determine your ARV.

Once you have an idea of your ARV, then you can calculate your renovation costs to see if they make sense.  To do this, you’ll want to use a good budgeting spreadsheet (here’s one).

Think about utilities

Chances are the garage isn’t on its own utility meter.  You’ve got two options, then, when it comes to utilities.  You can pay the utility company to provide a separate meter for your garage apartment, or you can stick with just the one meter.  

Keeping both rental units on one meter would certainly be the less expensive route to go, but you’ll have to calculate a rent amount that includes utilities for all tenants since you’ll have no way of determining utility usage by unit.

What about parking?

Parking is another consideration.  Most tenants won’t have problems parking in the street, especially if the rent is priced right, but just make sure street parking is allowed.  If tenants have to park three blocks away, that might make finding quality tenants really difficult.

My experience converting a garage into an apartment

Several years ago I bought a 3-bedroom house that had an old workshop behind it.  At first, I was just going to leave the workshop as-is, and let the future tenant use it.

But then it dawned on me, “Why not convert the workshop into a separate rental unit?” I’m so glad I did. Here are some before and after photos.

Before…

converting detached garage into apartment

convert garage to apartment

 

 

 

 

…and after.

converting a garage into an apartment

turn garage into apartment

 

 

 

 

I decided to keep both structures on one meter, so I include utilities in the rent.  However, I still net close to $300 more per month with the 2nd unit than I would not having it, so it was a good move.  I’m glad I did it.

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