HELP...Best ROI - Should I convert 1 car side of 3 car garage?

Question

This will be my first big deal purchase....owner financed, 2 bed , 2 ba in the suburban Kansas City, Missouri area. Right now the property is just over 1100 sqft, has a full, but unfinished basement, and 3 (THREE!!) car garage (1 car/1 door and the 2 car/1 door side). I'm looking for advice and suggestions on increasing the ROI. With this being my first property rehab, ideally I'd like to swing the BRRRR method.

I personally think 3 garages is overkill and not sure it would get me any more cash flow as a rental, whereas converting that 1 car side of the garage (it's closest and connected to the rest of the house) into another bedroom puts me in a new ballpark with it being a 3bd/2ba unit.

I have yet to get bids, as I don't have access to the property just yet - so I have no idea what it would cost to convert the garage. Keep in mind, the property will STILL have a 2-car attached garage.

What are your thoughts and suggestions? Is there anything I should do to the basement that would be a good ROI?

Thanks so much for your time and help! I'm new here and new to all this, but I love this BP community and all the knowledge I've already gained here!

Rich Kniss · Answer

@Jenni Moore, I'm speaking from a theoretical perspective, as I have not done this type of renovation, but here's what I understand. Improvements should be paid off by about 2 years worth of increased rents, based on what I've read. If it takes too much longer, its probably not worth doing.

That would put you at $7,200 to $9,600 to spend on this conversion. If the garage space is 22' x 10" (typical size), this would be about $38/s.f.  A typical basic new build home is around $110/s.f and you are not building a roof or foundations, so you should be in range, depending on the specifics of your home.

One question is if your existing heating and cooling systems are capable of handling the increase load, or if you need to do a dedicated unit in the attic for this room. HVAC should run around $10-$15/s.f. as an average placeholder.

I'd make sure to have the floor levels are the same as the other bedrooms if possible, meaning you will have to frame a wood floor over the garage floor. Also make sure you plan for extra layers of sheet rock to keep a fire rated wall between the garage and the new bedroom.

Here's my rough estimate (keep in mind I'm not a contractor):

1. HVAC system new or upgrades ($3,500)

2. Raised floor structure ($2,000)

3. Gypsum board walls - about $5/s.f. of wall area ($2000)

4. Closet doors and bedroom door ($500)

5. Lighting and electrical ($600)

6. Removal and infill of garage door, new siding ($1,000)

7. New window where garage door was located ($500)

8. Carpeting ($650)

9. Paint ($750)

Subtotal $11,500

10% contingency ($1,150)

Total $12,650

Reduction to only adapt existing HVAC system ($2,500)

Revised Total $10,150

I think the HVAC system is a big determining factor of this decision. Hopefully there is enough existing tonnage to make this work. My opinion on this is that it is worth doing if you have some level of confidence of the increased rental numbers. Have you checked Craigslist or Rentometer.com to confirm your understanding of the difference of an extra bedroom?

On the basement renovation, I would not pursue that as I don't think you will get the returns unless you do a serious renovation to add a bedroom and bath with an egress window.

I hope that is helpful. Maybe other BP'ers can give some feedback on my numbers. Congratulations on your first big deal!

Rich

Vince Mayer · Answer

Or, you could renovate and sell retail and use the profit for a rental if you have to have a rental.

Jenni Moore · Answer

@Vince Mayer @Mark Gallagher

Thanks for your responses. I have yet to get inside the house, so I can't be 100% sure of the layout, but from the interior photos it looks as though the garage entrance is currently in the kitchen. I would intend to change that and put the new garage access entrance in a hallway or mudroom built behind the converted bedroom. If the bedroom is now in the 1-car side of the garage, it will still be in close proximity to a nearby bathroom, as there is a bathroom just off from the kitchen, but understandably not directly by the bedroom.

Would you all consider that a weird layout?

I'm definitely new to this, so gathering stats from comparables and rental prices is not something I feel really confident about, but it seems a 2-2 in the area will rent for $800-$1000/mo and 3-2 rents for $1100-1400/mo....most of those numbers come from apartments without garages/yards, but some are from duplexes. I've found very few houses in the immediate area, but certainly some within the same town/zip and they are in the $1200-1500/mo range.

I'm looking at getting the property for around $100k and using equity from my first property (the home I currently live in) to do the rehab work...which right now is just tearing out some damaged room additions in the basement and (hopefully) converting the 1-car garage. I normally wouldn't consider spending this much on my first rental/flip, but owner financing is so enticing. The owner wants out and doesn't want to put in the time/money to get it ready for market....that's where I come in...if it calculates out anyway!

Any ideas on how to find out how much it would cost to convert the garage?

The contractors I've spoken with want to look at it all before they will even shoot me a broad estimate - understandable - but I don't have access to the property yet.

Mark Gallagher · Answer

@Jenni Moore

Need to weigh the costs of converting versus your increase in rent. Also, you'll want to stay away from turning it into a "weird" floor plan with a bedroom in the garage if it doesn't flow well.

Vince Mayer · Answer

Actually, as I reread your @Jenni Moore comment, it looks like you have a weird layout. The garage already abuts a bedroom. Is it a good enough neighborhood that you can spend a large amount on rehab? Where is the kitchen, living room? Does it have a dining room? You have room in the basement for bedrooms but you will have to have a bath down there.

Vince Mayer · Answer

I think you would have to put the third bedroom somewhere else if you want to make an entrance to the house from the garage. However, 3 beds are definitely better depending on the neighborhood.

HELP...Best ROI - Should I convert 1 car side of 3 car garage?

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