BiggerPockets

I am considering picking up a small 3 bedroom, 2 bath home and renting it. I could probably pick it up for $50K w/a down payment of around $15K and it would rent for about $700-$750 a month as it is now.

The house is located on a double lot with a large, 2 1/2 car barn-style detached garage that sits behind the 2nd lot. The garage is not quite two stories but almost. The garage is wood-framed on a concrete foundation, sided and roofed similarly to the house and already has electric running to it, but no plumbing. Has anyone ever converted a garage to an apartment or studio and if so, what was involved in doing so?

Without the garage, the house still has an off-street parking area behind it for 2 cars as well parking on-street in front of the house. The garage (possible apartment) would also have parking on the street in front of the empty portion of the double lot in front of it, as well as a space behind it. The garage is currently accessed from the alley (where the garage door sits) as well as a separate door from the yard.

It seems that in the future there could also be room to add a 2nd property on the double lot, but seeing that would involve a whole new structure + utilities, would not be as cost efficient, as this area isn't one I would expect a lot of appreciation in.

Thanks!

Also, I guess I would need to speak to the zoning department, if I were to rent it out as a separate apartment?

I'm thinking by the 2% 'rule' if I can rent it for $400 a month, it would be a decent deal if I could convert it for under $20K. I believe it could be done as the foundation, structure and roof are already built, and some of the work I could do myself, as I'm already rehabbed 4 houses outside of this.... ???

A friend of mine rents a house that was converted into two units and has them split the utilities in half. I wasn't sure if the electric could be split based on square footage %.

I don't know what the cost would be to run separate utilities, as I've never done that before. Or, like you said I could include utilities and add it to the total rent cost. The other thing I've done on a house in which I rented out the three bedrooms separately is get the average monthly utility cost, and then say the place rents for X, and they are responsible to pay utilities at a flat fee of Y per month.

I can see how the shutoffs would be a pain though.

I'm also trying to get a rough idea of the cost involved in converting something like this versus the rents I'd pull from the end product, since I've not dealt with anything like this before.

Check the zoning. Also, they should allow you another unit, as most areas of the country now have a policy of allowing in law quarters, but they have different policies regarding them.

As mentioned above the biggest obstacles are getting sewer and water lines in. Good luck, and great thinking!

Another option is to rent the garage seperately from the house for storage or a work shop. In years past, ive had need of extra space for toys, tools, equipment, and when my hobbies outgrew my shop space. Ive paid up to $350 for an insulated, heated garage and $150 for storage.

@Scott Sewell, @Randy F., how would you advertise something like that? I am out of town so don't manage the property, so I'm guessing a property manager could handle that part as well as the main house?

We had the same situation as you only our garage is larger and we are eventually converting it into 2 apartments. One super-efficiency (think hotel room w/ kitchenette) and the other a one bedroom with the bed and bath upstairs.

We live in a small town as well and found the hookups for water/sewage to be pricey, but not anything like yours. I believe our water/sewage permits were around 2k, plus installation which we had a friend of ours help us with at a discounted rate.

We did find that having it re-zoned so that we could put 2 units in it was a pain. We had a neighbor that was very outspoken against it bringing other neighbors and her friends with her to say how terrible tenants were and that the lady in our rental house was already a disturbance to her (turns out she was bothered by the RC car that the boyfriend ran up and down the road during the afternoon sometimes on his days off because it bothered her dogs). We finally got it zoned to do the 2 units as several spoke up saying that in this community most tenants are in good standing with their landlords and our local officer on the board spoke up on our behalf saying he wished there were more landlords like us in town. I think we ended up debating it in 3 or 4 meetings... seemed to drag on forever!

Ours was already very well insulated and the wiring all run downstairs as the previous owner had used the whole downstairs as a workshop. The upstairs is unfinished and will need everything.

We went ahead and built the super-efficiency last summer and have a young couple living there. We are working on a flip right now so the other side will have to wait until we don't have other projects that are more important, and as we have some extra revenue from our rentals to invest in the other side.

We considered renting out the garage as is to the family renting the home on the attached lot, but decided that long term the garage space would be more profitable as apartments.

An additional garage I would think would be a major bonus to a tenant, especially someone who liked to tinker on cars or maybe had an old classic.

Our tenants inquired about renting ours, apparently they were renting a storage unit in town, but we were already set in a plan. I'm pretty sure our tenants only wanted to pay a small additional fee for the space, but you may find someone who would find the garage to be a great asset to the property who may be willing to pay what it's worth to have the space.