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Converting a garage to an apartment.

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Amie D.

SFR Investor from Covington, Kentucky

Feb 23 '13, 12:45 AM


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!


Edited Feb 23 2013, 00:55 by Amie D.


Amie D.

SFR Investor from Covington, Kentucky

Feb 23 '13, 01:10 AM


Forgot to add, studio apartment rentals start at around 400-450/mo in that area.



Amie D.

SFR Investor from Covington, Kentucky

Feb 23 '13, 10:15 AM


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.... ???



Steve Babiak

Real Estate Investor from Audubon, Pennsylvania

Feb 23 '13, 10:36 AM
2 votes


You'll need to get SEPARATE utilities to that unit unless the landlord plans on paying for the utility bills. Existing electric might just be tapped off of the existing house panel; you would want a separate service line and breaker panel for this garage unit. You could have electric heat, so no need to consider heating fuel unless you want to use some other fuel source. Not sure how water and sewer are handled there, but shared water and sewer usually falls on the landlord. Anything else like trash to consider too?

Here is a link where I posted about allocating utilities to tenants without separate meters (not advisable in my state of PA):

http://www.biggerpockets.com/forums/52/topics/72185-water-sewer-bill---what-to-do-with-it?page=1#p412876



Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Amie D.

SFR Investor from Covington, Kentucky

Feb 23 '13, 11:03 AM


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.


Edited Feb 23 2013, 11:09 by Amie D.


Randy F.

Contractor from Anchorage, Alaska

Feb 23 '13, 12:52 PM
1 vote


I like the way you think, Amie. I like the big old homes with carriage houses in the midwest for that very reason. The largest expense will be bringing in water and sewer. Even if its close by, the dollars add up fast bringing it in under the slab. It will also likely need its own electrical service as Steve mentioned, and then rewired based in layout.

The first thing I would check out is whether or not the city will allow it. If it is as it sounds, that the garage door is right on the alley, it may be within the easement. May be grandfathered as garage, but generally a dwelling needs to be a minimum of ten feet off property line. You might also check on what they would require as far as plans and permitting. Having never been a habitable dwelling before, they may require engineered drawing/plans. If youre trying to get it done under 20K it all adds up really quick.

If the garage doesnt pan out and this is in a smaller town where mobile homes are permitted, you could plant a decent one on the lot for near the 20K and get $500 -$600 with the garage. If you put $25K into setting up MH you'd be all in with the two rentals at 1.7%.



Karen Margrave Moderator

Developer from Orange County, California

Feb 23 '13, 03:58 PM


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!



Medium_tmg2Karen Margrave, The Margrave Group
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.themargravegroup.com
Licensed Brokers & General Contractors R.E. Developers (Parlay Investments). Orange County CA


Amie D.

SFR Investor from Covington, Kentucky

Feb 24 '13, 07:15 AM


It's a mid-sized town and in a residential neighborhood, so I don't think I could put a mobile home there. I suspect that would also bring down the rental value of the main house, having a mobile home sitting next door. Not a bad idea for an isolated lot or rural area though.

I checked manufactured housing to compare costs of hooking up utilities, and it seemed like the plumbing/electric parts would be 10-15K in itself. So yeah, would add up quick. Not sure I will go this route, I don't want to put too much into it.



Randy F.

Contractor from Anchorage, Alaska

Feb 24 '13, 12:19 PM


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

Real Estate Investor from Anchorage, Alaska

Feb 24 '13, 01:49 PM


Ditto to Randy F.'s reply and the comments about Zoning issues. We have an old house with 2 two car garages, we rent one separately (it has access from the alley behind the property) for $350 and it generates our margin for the property. Doing this changed it from a break even deal to cash flowing.



Scott Sewell, Anchorage Rental LLC


Amie D.

SFR Investor from Covington, Kentucky

Feb 24 '13, 11:16 PM


@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?



Amie D.

SFR Investor from Covington, Kentucky

Feb 24 '13, 11:54 PM


Also, do you think a house would rent for a lot less not having a garage, if I rented it out separately?



Suzie B.

Greentown, Indiana

Feb 25 '13, 05:30 AM


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.



Amie D.

SFR Investor from Covington, Kentucky

Feb 25 '13, 11:27 AM


I just spoke with a property manager, not necessarily the one I would go with, but he said that he would not advise renting the garage separately as it would affect the rental value of the house as a whole, and also they have rented garages before and haven't had that much success in doing that, it took a while to rent and they didn't realize a good income with it.

I don't know if that is so, though. My grandmother lives about a mile away from this house, and rented out her smaller 2 car garage before for $150 a month.

It would just seem like a house on a double lot with a very large garage would have more options than renting it just as-is. I feel like if I were to pay property taxes for the added lot etc it should be doing something, as the house rent doesn't seem to be much more than houses without a double lot, unless the prop mgr is not pricing it correctly.

My brother rented out 7 acres of a farmhouse he had to a farmer before, but that was in a rural area.

I'm leery of spending a lot to build on it, though, as I don't see this area appreciating in value much more than just as the economy itself rebounds. Hmmm. Maybe I should pass on this one, but it seems like there would be some opportunities with those other amenities, that maybe I am missing?



Suzie B.

Greentown, Indiana

Feb 25 '13, 03:40 PM


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.



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