Build a New Garage to rent out, in a SFR backyard?

[Ryan PRice]

Hi All,

I'm considering building a garage/workshop behind one of my SFR properties. There would be access to the garage directly from the alley. The idea is to rent the garage out separately from the house, for use as storage and/or hobby use as a workspace. If I could get close to a 10% ROI (or the 1% rule) then I think it could work out very well, with less maintenance (it would be brand new) and fewer issues than dealing with a typical habitable rental. I've read the article posted on B.P. about doing this, as well as any info I could find elsewhere. There are still many questions that I have. Here are some to start.

1. Am I likely to run into any zoning issues (zone is SFR) with this, whether used just for residential storage, small business storage (contractor?) or "hobby" use?

1. Would I be allowed to have a separate electric meter setup?

- Approximately what would that cost?

- If used as a hobby work space, then heat and AC might be desirable. Perhaps a simple window unit that also heats could be the ticket.

3. I have no idea how this could play out as far as taxes go… Yes I do my own taxes, I need to hire a pro for that at some point.

4. I’m not sure how to approach the insurance aspect of this.

5. Should I use a prefab Garage (definitely with treated plywood floors) or go with a more traditional concrete pad, despite the higher initial cost?

6. There is plenty of space to build, but I'm unsure of the best size for ROI. I suppose 12x24 would be about the smallest reasonable size. But perhaps I should consider 16x24 or 20x20 or so?

While the primary reason for doing this would be to maximize profits on existing properties and land, there is a possibility that I could end up living at this property in the future. If so, I would want to have a workshop or garage at that time for my personal use. It would be awesome if it was already in place and paid for, if I end up living there. Really that would be a bonus, so I cant base this decision on the fact the I “might” end up living there in 8-10 years or so.

I would setup the space so that it could be accessed only from the alley. So that the tenant of the house wouldn’t be bothered any more by the garage tenant, than they would be by a next-door neighbor using their own backyard garage. This is in the city.

I put up a TEST ad on Craigslist and got 4 different inquiries within about 24 hours, and then no more since then, but this was just a few days ago. I think there is a smaller market for such a thing as compared to an SFR rental, but I do believe there is a market for such a space in the area.

Any advice, or experience on this topic would be much appreciated.