West Oakland, Convert shed to a habitable space?

[Nate B.]

Bigger Pockets Community,

I currently own a duplex in West Oakland where I have a shed/cottage in the rear of my lot. I went down to the city to talk to them about making the shed a habitable space (upgrading foundation, new plumbing, upgrading the electrical, new roof, and adding a full bath). The city told me that I can NOT do that since zoning did not allow it. After going back and forth, the city gave me 2 options;

• 1. I can extend the duplex all the way to the shed, thereby making the shed part of the lower unit.
  • This would NOT make the shed a 3rd unit; it would just be an extension of the lower unit.
  • The estimated cost is about 60-70 thousand
• 2. I can leave the shed where it is and had a half bath.
  • I would have to update the foundation and add a sewer line
  • I can NOT make it a habitable space
  • The estimated cost is 10-15 thousand
  • This can be used as an office space or art studio
• 3. Just build the 3rd unit illegally
  • I don’t want to do this because I could run into some issues in the future with the city and possibly the tenant

BP community, my question, what do you think is the best thing to do.

• Option 1 would cost more and would add to the value of the property. And I may be able to Air B&B the new addition.
• Option 2 could be cheaper but I wonder if it is wasted money because I could just use that 15K and buy another property. However, I may be able to rent it as an office or art studio but I don’t know if there is a market for that in West Oakland.
• Option 3, I don’t want to consider it, but thought it was worth listing it just in case you have an opinion on it.

What do you suggest I do?