DFW deal: how would you comp a house hack vs flip with a converted garage?

Question

I looked at a property in the Garland/Dallas area and I am trying to figure out the best way to evaluate it.

It is a 4/3, but part of that includes a converted garage that is already split into multiple rooms with its own entrance and AC. With some work like adding a bathroom and kitchenette, it could realistically become a separate 1 bed unit.

The main house has been nicely updated. Kitchen, bathrooms, and flooring are all done well and it is fully move in ready. What makes this one tricky is that it is both renovated and still has a lot of potential at the same time.

As it sits now, it could be rented or sold without doing anything. But the garage space is more outdated and set up in an odd way, so I think most buyers will just see it as wasted space rather than fully understanding what it could become. There is also an insulated building in the back with AC that could have additional use with some cleanup or light work.

The challenge I am running into is comps. There is really only one nearby property with a similar converted garage, and it is basically the finished version of what this one could be. If I use that as ARV, the deal starts to make more sense. But most of the other comps are standard 3/2 homes with actual garages. If I underwrite it that way, as a 3 bedroom with some converted garage space, the numbers get very tight.

So it feels like this property can be viewed a few different ways depending on the buyer.
- As is, it is basically a 3 bedroom with bonus space.
- With some work, it could be a 4 or even 5 bedroom
- Or it could be set up as a house hack with a separate unit.

I originally tried to make it work as a wholesale deal and could not get it to a number that made sense for the seller using traditional flip metrics, which I understand from their side. At the same time, I do think there is real potential here, just for a different type of buyer. That is where I am getting stuck on how to confidently land on a number that makes sense for both sides.

- How do you approach ARV when there is really only one semi relevant comp and everything else is a different product type?

- If you were buying this as a house hack or co living setup, would you still stick to strict investor discounts or be more flexible based on the potential?

- Would something like being around 20k- 30K under a realistic retail price be enough to make this interesting in that kind of strategy?

I am still learning on the house hacking side. I have reached out to someone local who does co living to get their perspective, but I wanted to ask here as well. I would really appreciate any insight from people who have dealt with properties like this.

Thank you! - Haley

Landon Reid · Answer

Haley — I literally just helped someone in another thread here with a converted garage property in Garland that sat for 120+ days. The comping issue you're describing is the #1 problem with these properties. Here's how I'd approach it:

On ARV with limited comps:

Don't try to force the converted garage comp as your primary. Instead, run it two ways:

1. As a 3/2 with bonus space (comp against standard 3/2s in the area, then ADD a small premium for the extra livable sqft — usually $10-15/sqft max, not full bedroom value)

2. As the house hack setup with a separate unit (comp against properties that have actual ADUs or duplexes nearby)

Whichever gives you the LOWER number is your conservative ARV. Use that.

The critical thing most people skip:

Before you go any further, check if that garage conversion was done with permits. In Garland/Dallas, an unpermitted conversion can kill your deal in three ways:

- Appraisers won't count the square footage

- Lenders won't underwrite it

- The city can require you to convert it BACK

Also check the zoning on the property — if it's zoned single-family, you may not be able to legally operate it as a house hack with a separate unit regardless of what the physical space allows.

On the $20-30K under retail question:

For a house hack play, your math is different than a flip. You're buying the cash flow, not the spread. So the question isn't "am I getting a deal" — it's "does the rental income from the converted space cover enough of my mortgage to make living there essentially free or close to it?"

If yes, you can pay closer to retail and still win. If no, you need a bigger discount or the deal doesn't work.

Haley Garcia · Answer

@Landon Reid Landon, this is great and funny enough, sounds like we are talking about the same property (I put 4/2 by mistake, it's currently a 3/2). I've seen it in person and know it will be a great opportunity for the right buyer. The timing is not right for me or I would try to get it myself. I see the potential and would love to help this seller find the right buyer.

Also,I appreciate you calling out permits and zoning, that’s something I’m digging into now because it definitely changes how this gets valued. The cash flow vs spread point also helps reframe it, too. Thanks for the insight!

Haley Garcia · Answer

@Melissa Hartvigsen this is really helpful, especially the point about square footage vs bedroom count. That makes a lot of sense with how buyers would actually view it. I also appreciate the perspective on pricing it between wholesale and retail, that’s kind of exactly where I’ve been stuck. I would be interested in purchasing it myself, doing a little work and renting it out, but the timing is not right for me. I do think it would be great for opportunity for someone though. Thank you for taking the time to write all of that out.

Melissa Hartvigsen · Answer

Hello @Haley Garcia,

I house hack, in an entirely different market, in Portland Oregon.

Keep in mind that the 3/2 homes with garages are likely viewed with more utility (storage/parking) over the extra rooms, and will attract the most potential buyers. Your 4/3 home with the converted garage with a separate entrance will be looking for a niche buyer who wants to house hack, work from home, etc. It may sell for a little less than the others (1-2%).

Instead of pulling comps by bedrooms and bathrooms, you can bracket by square footage. From an appraisal point of view in my market:

• -appraisers give extra value when going from 1 bathroom to 2 bathrooms but going from 2 to 3 bathrooms is viewed as marginal utility (and less than $2000 in value added) because 2 toilets already meet a family's needs.
• -appraisers will only give extra value for additional bedrooms if there is substantially more square footage. For example, if you have a 2500 square foot 3 bed 2 bath home, the bedrooms will be larger than a 4-bedroom 2-bathroom home with the same square footage. However, a 4-bedroom 2-bathroom home with 3000 square feet would be valued differently.
• -Try running the scenario through AI. It isn't perfect but it can help you find additional comps. You can also ask it how it would adjust the value based on the odd layout, location, etc. It provides explanations and usually a link to where it pulled the data from. You can even ask it to help you draft a letter of intent to the seller to help make your case for your price.

To address the dated aspect and odd layout of the garage space, you can use virtual staging to show the potential. (You just have to disclose that those images are "virtually staged to show the property's full potential".)

Trying to wholesale, you need to give the seller incentive to take that price. Since there is potential, and the work isn't done, that gets factored into the price. Stress the convenience of quickly offloading the house. Don't give up if it is new to the market. Sellers whose homes are not fully market ready need time for the market to tell them the house isn't worth their price. Lack of interest from other parties, and months on the market without selling can wear a seller down. You need to stay in touch with them during that time and keep letting them know you are interested.

- How do you approach ARV when there is really only one semi relevant comp and everything else is a different product type? Walk the numbers backwards. Start with the finished house price, subtract the rehab cost, holding costs, and your profit. This is your purchase price.

- If you were buying this as a house hack or co living setup, would you still stick to strict investor discounts or be more flexible based on the potential? I would be somewhere between the wholesale price and the retail price for the house that is already a 4/3. Consider what you need to spend to make it a true separate space, some extra for the hassle of managing the build out and deduct that from the price. This would be a great win-win option if you were the one who intended to house hack the property because you get the property at a discount, and the seller would receive more money from the sale than they would on the wholesale.

- Would something like being around 20k- 30K under a realistic retail price be enough to make this interesting in that kind of strategy? It depends on what the cost of adding the bathroom + kitchenette, and what permit costs are. I would also want a discount from the seller for me being the one taking on work. If I wanted to pay full price and not put in the work, I would buy the other house.  I would also consider the potential rental income, my holding period, and my exit costs before finalizing an offer to the seller.

Good luck!

Melissa