No matter how the housing market fluctuates, one thing remains the same: people want good deals and are willing to live in a small space to save money. With that said, you might be wondering if you should turn your garage into an apartment.
Many people do it, and it seems like a great way to earn some extra income if you don’t mind having a tenant living on your property.
However, there are rules you’ll need to follow if you choose to turn your garage into a living space.
A garage space has to be livable
First and foremost, if you’re going to rent a garage to a tenant, it must be habitable according to state and federal laws just like any other dwelling. It has to meet building and fire code requirements along with other specifications. For example, you’ll need to provide heat, plumbing, and electricity. This seems easy, but it’s not actually that simple.
Most likely, your current garage isn’t livable and will need some major improvements to make it rentable. Even if you’ve insulated the space and added drywall and furniture, that’s not enough to make it legal.
Before you even think about publishing ads for your garage rental, you’ll need to hire an inspector to evaluate the building and make recommendations for getting it up to code for habitability. Once you do that, you’ll have to get the proper permits and make those changes, which can cost more than $100,000 in some areas.
General costs for a garage conversion
If you choose to convert your garage to an apartment, you can expect these general expenses:
- Design fees can range from a few thousand to more than ten thousand dollars
- Builder’s risk insurance can be around $2,000
- Fees for applicable energy efficiency calculations (these will vary by state)
- Waterproofing, insulation, building retaining walls, etc. can cost several thousand dollars
- Construction costs can be upwards of $100,000 or more
- Appliances and fixtures that don’t come with the build can cost a few thousand dollars
- Permits and fees can run between $5,000 and $15,000
Why you shouldn’t skip building codes
As tempting as it is, never skip building codes when converting a garage into an apartment, no matter how busy you are. If the building itself is unsafe, your tenants might become injured.
However, skipping codes also leaves you open to lawsuits. For instance, a tenant can sue you just for not being up to code, but that’s not all. Say your illegal garage tenant starts a fire and ends up injured. They can sue you for their medical bills. On top of that, you’ll also be on the hook for all the damage.
If you don’t want to build a full bathroom or kitchen in your garage, you can agree to share these spaces in your home with your tenant. However, you’ll have to make them accessible 24/7, which means your tenant will be coming in and out of the house frequently. If you’re already going to spend the money converting your garage, it’s more convenient to add a bathroom and kitchen than to coordinate shared living space.
The benefits of renting a converted garage
There are many benefits to renting out your garage once it’s been legally converted to an apartment. The most obvious advantage is generating extra monthly income from rent. Another benefit is having your tenant close by, which means you can keep a better eye on your rental property. It’s also cheaper than buying a brand-new property.
Another benefit you may not have considered is reduced liability for discrimination lawsuits if you share a common area in your home, like a bathroom or kitchen. Normally, the Fair Housing Act (FHA) prohibits landlords from rejecting applicants based on their gender, faith, or other personal factors. However, the FHA doesn’t apply when a tenant and landlord share living areas.
If you share space in your house with your garage renter, the U.S. District Court of Appeals ruled that you can discriminate regarding who you rent to, however, you can’t advertise discriminatory preferences. There are workarounds that will help you find the right match.
The downside to renting a garage apartment
Other than having a tenant close by if you prefer privacy, the main disadvantage of renting a converted garage is the cost. It’s a major investment, so make sure you’re committed to renting it out long-term.
Should you convert your garage? It depends
If you don’t need your garage and you want some extra rental income, converting your garage to an apartment can be worthwhile. On the other hand, if it was just an idea and not part of your investment strategy, you’re probably better off keeping your garage for storage. If you need extra money without taking on the expense of a remodel, you can always rent your garage as storage space.
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