The structure has to either already exist (we converted the garage) or you can do an addition to the property and build it out that way.One of my clients took an illegal garage conversion that was expanded into two bedrooms and used the FHA 203(k) loan to get it permitted.

Is this a property that was used as a primary residence before converting it to a rental?

Perhaps there's a way for her to convert this house to either her primary residence (For 2 years) or rent it out and use it as an investment property so she can get more creative with the sale of the property to save on some taxes.If this isn't possible she'll want to try to offset some of the gains from the sale with capital losses as well as using any improvements and selling costs to lower her capital gains.

@Alison CromwellIn order to obtain a flip loan with no consistent income history, the following steps need to be undertaken: create an impressive credit score, put aside more funds as a down payment, check out new methods of getting funding besides what is available from banks or other financial institutions, involve yourself in investments with toughened entrepreneurs, show how financially sound you are by doing things such as getting enough money into savings over time through frugal living habits or accumulating valuable assets that can be readily converted into cash when required among others like developing several stable sources of income or steadily growing one.

It started with a call from an associate who had once worked with me, he had some gig converting old giant homes into multis for an investor group, some rag tag group out of Vegas.

This is relevant because many STRs converted to MTR at the same time resulting in a significant increase in supply. 

You should be able to add a bathroom and 100 sq ft for under $100K and convert a garage for under $300K.

My question is, is it worth the investment to convert the garage into a game room?

As far as the value add strategies like converting a basement (rare in this area), attic, garage, etc., I don't know if the town would even permit that and they don't return calls or emails. 

I plan to convert my Surf City house into a long term rental soon (long term since my HOA currently does not allow STRs).I am an active duty Marine and have been in for almost 10 years.