Turning a garage into a rental unit can add income, but the project may come with a costly surprise. A water line upgrade alone can cost as much as $70,000, not including the rest of the conversion.
Here's what to know
Buyers increasingly want homes with these units or garages converted into them, according to 10News. These separate living spaces occupy the same lot as a single-family home and are known as accessory dwelling units, ADUs, or granny flats.
ADU permits issued annually have risen to over 61,000 from fewer than 5,000 in 2016, according to Pew Research Center figures cited in the report.
Buyers must account for permitting, materials, and construction costs if they decide to add a unit. Brian Koons, a buyer and developer at Byld Partners, outlined two options for interested buyers: purchase a home with an existing ADU or build one on their property.
More background
According to SD Cash Buyer.com, monthly ADU rents range from $1,200 to $4,000, depending on their size and location. That range, however, does not guarantee what a particular garage conversion will earn.
Beyond monthly income, expert estimates cited in the report suggest that an ADU can increase a home's equity by $100,000 to $300,000.
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Sharing expenses with family, rather than collecting rent from an outside tenant, motivates many multigenerational buyers looking to live on one property. Mike Blair, owner of Mike Blair Realty Group, told 10News he has seen growing demand for homes with these units.
What can be done?
Koons estimated in the 10News report that the total expense is about $350–$600 per square foot, depending partly on whether owners do some work themselves and whether infrastructure upgrades are needed.
One potentially expensive requirement is a water line upgrade, which Koons said can cost $50,000 to $70,000.
Blair said an ADU can offer more up-to-date air conditioning, lighting, upgrades, and technology. Those features could be available for the same rent as an older house with an equal number of bedrooms and bathrooms.
"Even if they're bringing in their parents, for example, that live in the ADU, that does help supplement the house and mortgage that they currently have," Blair said.
Where can I learn more?
Garage conversions aren't the only way plans for cheaper housing can run into unexpected costs. These stories cover shed conversions, garage solar equipment, and off-grid living expenses.
• Americans are turning $5,000 sheds into homes as rents and mortgages slip out of reach.
• A UK homeowner planning a garage solar battery learned the gateway belongs near the electric meter.
• An aspiring off-grid resident learned that tracking every gallon becomes part of daily life.
• An off-grid creator shared cabin life's real costs, showing that self-reliance still requires a budget.
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