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Does building out a garage ever make sense?

June 1, 2013

A year ago I would have said “Garage build-outs never make sense”. Well, I am somewhat evolving on this subject as my latest purchase had a converted garage.

10922 M front

Let me explain when I think it can make sense. Let’s say you have a great rental area that is full of older homes built in the early to mid  50’s. The homes are well built, pier and beam, hardwood floors, large lots and in a great centralized area. The problem is they built a lot of 2 bedroom homes back then. These homes are around 800 square feet but are over 1,000 if you convert the garage. 

Many of the people in these Class C/D type neighborhoods have already started building out their garages and making more room for their larger families. Some are putting up carports in the front and others are building detached garages on these oversized lots. The question is would you build out the garage for that 3rd bedroom and perhaps even a second bath?

Let’s look at the numbers. I have found the extra bedroom adds about $100-150 per month especially if you can add a second bath. The cost of the buildouts can really vary, but a decent job might cost around $5-8k for a single car garage conversion. To me this is a borderline good investment. It will increase the value of the property and the expected rental income, but not as much as you might think. Many tenants want and expect a garage. Even if they just fill it with junk – at least they have the space. The 3 bedrooms certainly rent quicker and I think you get longer term tenants in there as well – so you almost have to look beyond the numbers. 

So why did I buy a property with a converted garage?  

  1. The build out was done properly. Many of these buildouts are done poorly and the house does not cool or heat properly, roof leaks, lack of windows, not up to code, etc. This one was done well. It changed the layout of the kitchen (making it bigger), added a laundry room, and added what could be considered a 3rd bedroom. This was a nice feature that sets the house apart from others in the neighborhood.
  2. They put in a nice single car garage in the backyard with alley access. While it is not attached to the home, the garage is oversized and very nice. This eliminates the issue of the home no longer  having a garage after the buildout.
  3. They put a carport in the front driveway. This allows the tenants to still have a place to protect their car.

Would I ever buy a 2 bedroom and do the conversion myself? Probably not. The price has really got to be good when it comes to two bedroom homes, but I think there is less competition and the conversion option is always there.

det garagedet garage 2

From → Buying

  1. This is a topic that I have considered several times also. Like you, the numbers never seemed to work out that well. I like the way you broke the costs and benefits down.

    And, that’s a good point that many tenants expect to have a carport.

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