Tear down garage to turn duplex into triplex?

San Diego, California
Multi-Family and Apartment Investing
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Tear down garage to turn duplex into triplex?

Jacob Flaxman
Member since 2024 · 3 posts · 2 votes

As the title says, I have mixed feelings about this project. I have a duplex in a premium location. One block from the beach in Ocean Beach, San Diego. There is a detached two-car garage that the 2 units split. I can convert the garage into a one or two-story extra unit on the property.  I am worried for two reasons: removing the garage will reduce the value of the homes more than the extra unit will add, and the property value will not increase that much with the extra unit(s). The area does not have many units with parking spaces or garages, so, I am not overly worried about this (will probably reduce rents by $100-200). The two existing units can rent for about $2,500 each, and a garage conversion single unit will rent for about $2,800. Construction will cost about $120,000 for a garage conversion and $250,000 for a two-story, 2-bedroom. (2 bedroom will rent for $4000-$4500). 

My initial reaction is that it costs $150,000 to add an extra door in a premium location, but I am interested to hear thoughts. 

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  • Ben TrageserPro Member
    Accountant · Montclair, NJ · Member since 2020 · 218 posts · 104 votes
    1y

    Parking in OB is highly sought after as I'm sure you know. I personally think it really depends on how much value will it add to the property and if the town will allow it. 

    If you plan to sell it in the near future, I would focus more on the added value overall. If it provides a nice return on investment and you plan to hold it for a long while, then it makes sense.

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  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    1y

    @Jacob Flaxman, I am not familiar with this market, so take what I have to say as more of a general comment.

    My first thought is $250k to build a two story, two bed "house" will cost more than $250k.  But, assuming this is a fairly accurate number, the little I know about San Diego (and quick look on Zillow for multifamily properties) seems like $1.5mm is the minimum asking price for two units.  

    To resolve parking, is there anyway to maintain the driveway for a couple off-street parking spots, even though the garage is gone?  

    Again, if your $250k is true, and includes all the electrical upgrades, new plumbing runs, potentially new foundation pour (since I assume the existing garage slab is not capable of supporting a new two story house), I am guessing since I don't know the market, but assume you will have a lot of equity by completing the project.

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  • Robert Rixer
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    1y

    You've answered your own question. If your gut is casting doubt on it, you need to listen - even if you can make mathematical sense of it.

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  • Alan AsriantsBusiness Member
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    1y

    If you take that cash and try to buy units in the area, ask yourself what are they selling for? I am seeing a trend in CA that ADU construction is more cost effective (per unit) than buying on the market by a long shot. But you bring up great points. ADU construction is not 1:1. meaning investing 250k into your property by ADU will likekly not increase your property value by 250k. Its possible in your area that garages and parking are more valuable than units - this is your appreciation.

    Seems like with ADU you get better cash flow, but with garage you maintain better appreciation. Maybe there is a balance of both? Maintaining parking in garages below and build unit on top of garage. IDK, but worth looking into.

    Also try looking into subdivision if possible.

    If you need a decent contractor/gc to consult with, I can connect you to my partner in the area. 

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    Knowing that area very well, I would say keep the garage. Parking is worth more than money down there in OB.....

    And I am pretty sure that your $$ numbers are low, about 50% at least.

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  • Jacob Flaxman
    OP
    Member since 2024 · 3 posts · 2 votes
    1y
    Quote from @Bruce Woodruff:

    Knowing that area very well, I would say keep the garage. Parking is worth more than money down there in OB.....

    And I am pretty sure that your $$ numbers are low, about 50% at least.

    Got it. I am leaning towards keeping the garage and adding a unit on top. The adjacent property has the same layout as the one I just described. This would leave 1 unit without a garage but I STR that anyways.

    Also to note the garage is very small and awkward to park in. It can barely squeeze my Tacoma in there. And once in, its so narrow I have to weasel out of my car. 

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  • Jacob Flaxman
    OP
    Member since 2024 · 3 posts · 2 votes
    1y
    Quote from @Ben Trageser:

    Parking in OB is highly sought after as I'm sure you know. I personally think it really depends on how much value will it add to the property and if the town will allow it. 

    If you plan to sell it in the near future, I would focus more on the added value overall. If it provides a nice return on investment and you plan to hold it for a long while, then it makes sense.

    I already talked to the city and its OK to do what I am describing. 

    I currently STR the two units with a plan to only STR one of them once I build the extra unit. 

    When you added value, are you saying that I should do the garage to add value to the property? Or just focus on getting the current units nicer?
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  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    1y

    I like the garage conversions for ADUs since you can typically complete a 1-bed, 1-bath conversion for around $90K–$110K. I recently completed one on a multifamily property and found it to be a cost-effective approach.

    That said, there are a couple of additional factors to consider beyond the code differences between a garage conversion and new construction:

    1. Coastal Overlay Zones – If your property is in a coastal overlay, building a ground-up ADU may require Coastal Commission review, which can add time and complexity to the process. A garage conversion, however, may not be subject to the same level of scrutiny.
    2. Parking Considerations – Parking is becoming increasingly valuable, especially with the rise of high-density micro-units that often lack designated parking. Converting a garage means sacrificing covered parking, which could impact property value or tenant appeal in certain areas.
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