strictly read, the city of Austin requires a permit to spray foam insulate around an outdoor water hose bib...because it improves or repairs a structure.  

I say from a quick look 1k on materials is probably closer by the time you figure, studs, plates, insulation ( should be insulated) drywall, mud materials trim, door, door stop, door knob and casing. 

A big issue to consider is the type of insulation in the current garage.

I know "change of use" frequently triggers major expenses like seismic retrofits, insulation and fire code updates.   

@Elizabeth RoseYour attic or the walls may not be insulated properlyOr moisture getting in when it rainsAttach a few pics to your post

Definitely will want to add insulation and all utilities depending on what your plans are for it .

We are open to getting a home renovation loan and finding something cheaper and renovating, but we still can't get into the prime areas for the budget.We have been advised to make sure to choose an area insulated with good schools and parks but that's just not possible with our budget unless we go to the suburbs, which we are not willing to do.

I don't know what the ten year appreciation rate will be, but I'm betting it will be insulated against any negative macro trends and positioned to outperform other markets, over the long term. 

I know based on the Illinois Condo Act, HOA should cover the wall, insulation and electrical. 

-Ultimately, the water came through the roof/ceiling a soaked my first floor, insulation electric, sheet rock, flooring all ruined.