Build/rent garage apartment as first deal?

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I am trying to think of different strategies for my first deal. This one popped in my head on a long flight yesterday.

My personal residence is a 3 bedroom 1.5 bath brick ranch on 0.44 acres. It would probably appraise at 105K and I owe 78K. Current loan is 6.625% (bought for 90K 10 years ago (less than desirable credit back then).

I wondered if I could do a cash-out refinance, get 25K and build a 26x26 or so garage with some type of living space upstairs. I could probably rent a 1 BR or Studio for $400/mo. I have enough room for it where it wouldn't be too close to the house or neighbors. Almost as if it was it's own 1/4 acre lot.

Here are the numbers:

Value 105000

Balance 78000

Rate 6.625

----------------------------------------------------------------------------------

New Mortgage - 105000 

New Payment Payment (PITI) 850/mo (current 730)

Cash Out 25000 (Accounting for 2000-3000 closing costs rolled into new loan and what the balance will be in several months)

25000 to build a garage with 1(2?) bedroom/1 bath or studio maybe. I'm not sure how off I am on this estimate for a plain jane garage with living space. I have no clue about water/septic/electric needs/costs etc. Water is city though.

Rent living space - 400/mo (w/o utilities)

New payment goes up 120/mo.

We won't be living here much longer, maybe a few years to save money and invest. So the house will turn into a rental if that makes financial sense.

So in the future total rent between house and garage studio - 1100. Less payment of $850, leave 250/mo positive cash flow, not including other expenses, vacancy etc.

In the meantime, we have a garage, which would just be a luxury and could probably rent out later for storage or an extra rental income from the tenant.

Now that I type it, it seems like less of a viable option but maybe....

Adding image link to give a better idea of the house and land. https://imgur.com/a/1Q6MvAt

[Karen Margrave]

As to the suggestion by @John Peine of selling it as a storage unit , though creative, that's probably not an option, as it would need to be split off to sell with it's own parcel, and zoning probably isn't for storage units. 

Also, keep in mind that once you add the garage/apartment, it may make the main house less marketable, as they will have neighbors, etc. If it's a rural area, that could make a difference.