Journal Garage Apartments & ADUs

How adding a garage apartment adds value to your home

March 29, 2023 6 min read

Garage apartments are a favorite among the many ways to add value to a home. They can increase the principal value of a home more than other addition. Garage apartments are living spaces built above or beside a garage. It can be a separate unit with its entrance or attached to the main house

Garage apartments typically include a bedroom, bathroom, living area, and kitchen. A well-designed and constructed garage apartment can improve the overall value of a property. It becomes easier to sell the home in the future and increases the money you can get. Beyond that, garage apartments can be used for rental income, extra living space, or multigenerational living.

What factors influence the value of a garage apartment

The value added by a garage apartment can be affected by various factors, including:

Size: Generally, larger garage apartments can add more value than smaller ones.
Quality of construction: A well-built and high-quality garage apartment can add more value than one that needs to be better constructed.
Location: The value added by a garage apartment can vary depending on the property's location. A garage apartment may add more value in areas where rental properties are in high demand.
Market demand: The local real estate market can also influence the value a garage apartment adds. A garage apartment may add more value if there is high demand for rental properties in the area.
Rental income potential: The potential for rental income can be a significant factor in determining the value added by a garage apartment. A well-designed and well-located garage apartment that can generate a substantial rental income can add more value to a property.
Permits and zoning regulations: The ease of obtaining permits and the zoning regulations in your area can also affect the value a garage apartment adds. Some sites may restrict the size and location of garage apartments, which can limit their value.

The exact value a garage apartment can add to a home's listing price will depend on various factors such as location, size, quality, and market demand. However, a well-designed and well-built garage apartment can add significant value to a home's listing price.

According to some estimates, a garage apartment can add 20% to 30% of the property's overall value. The price may take time to reflect the value of a garage apartment, adding to the home's listing price. On the other hand, it may make the home more attractive to potential buyers and help it sell quickly. Rental income can be a selling point for buyers looking for investment properties.

Before you start building your garage apartment

Consult a contractor or builder with experience in this type of construction to get an accurate estimate of the cost of building a garage apartment, understand zoning codes, and design the space.

Cost of a garage apartment

The cost of building a garage apartment can vary depending on various factors, such as the size of the apartment, the materials used, and the location. The cost of building a garage apartment can be broken down into several components, including building the foundation and framing, installing plumbing and electric utilities, fixtures, finishes, permits, and fees.

Zoning and regulations

Regulations vary depending on your location, so it's essential to consult with your local government and building department before starting your project. Regulations concerning zoning, building codes, construction permits, access and egress, and parking may all affect the construction of your garage apartment.

The construction process:

The time it takes to build a garage apartment can vary depending on various factors, such as the size of the unit, the complexity of the design, the materials used, and the availability of labor. Generally, it can take anywhere from several weeks to several months to complete a garage apartment.

Building a garage apartment usually involves the following steps:

A couple high-fiving in the driveway in front of their finished two-story garage apartment

Designing the plans considering budget, zoning regulations, and building code
Obtaining the necessary permits and approvals
Preparing the site for construction
Building the foundation and framing
Installing plumbing, electrical, and HVAC
Adding the interior and exterior finishes
Making the final inspection

Overall, the time it takes to build a garage apartment will depend on the complexity of the project and the availability of labor and materials. Therefore, it's essential to work with a reputable builder who has experience with garage apartment projects and can give you an accurate estimate of the timeline for your project.

The price may take time to reflect the value of a garage apartment, adding to the home's listing price.

Tips for designing and building a garage apartment to maximize its value-adding potential

Following these tips, you can create a garage apartment that adds value to your home and meets your needs and goals.

Plan for functionality

When designing your garage apartment, consider how the resident will use it and who will live there. Make sure the layout is functional and maximizes space. Consider adding a separate entrance, outdoor living space, or storage areas.

Use high-quality materials

Using high-quality materials, such as energy-efficient windows, durable flooring, and modern fixtures and appliances, can help increase the value of your garage apartment and make it more appealing to potential renters or buyers.

Add curb appeal

The appearance of your garage apartment can significantly impact its value. Consider adding features like landscaping, a new driveway, or architectural details that complement the style of your home.

Consider energy efficiency

Building an energy-efficient garage apartment can reduce utility costs and make the property more attractive to renters or buyers looking for environmentally-friendly options.

Hire professionals

Building a garage apartment can be a complex project that requires specialized skills and knowledge. Hiring professionals like architects, builders, and contractors can help ensure that your garage apartment is built to code, meets your design specifications, and is completed on time and within budget.

Other forms of value

Building a garage apartment may have some tax benefits, depending on your situation and location. However, it's important to note that tax laws can be complex and vary by state and locality. Therefore, before building a garage apartment with the expectation of receiving tax benefits, it's a good idea to consult with a tax professional who can advise you on the specific benefits that apply to your situation.

Tax credits and reductions

Some states offer property tax reductions or exemptions for homeowners who build an accessory dwelling unit (ADU), which can include a garage apartment. In addition, depending on the materials and systems you use in your garage apartment, you may be eligible for energy efficiency tax credits. These credits can help offset the costs of solar panels, energy-efficient windows, and insulation.

Additionally, if you use part or all of your garage apartment as a home office, you can deduct a portion of the expenses associated with the space. This can include things like utilities, maintenance, and repairs.

Renting your garage apartment

Many homeowners choose to build a garage apartment specifically to generate rental income. Homeowners can offset the construction cost by renting the garage apartment, earning additional income, and deducting depreciation, reducing taxable rental income. Before renting out a garage apartment, you must check with your local government to ensure you comply with any zoning regulations or building codes that apply to rental units. You may also need permits or licenses to operate a rental property.

Additionally, it's essential to consider the potential costs and responsibilities of being a landlord. This includes maintenance and repairs, tenant screening, and property management. If you're not interested in being a hands-on landlord, consider hiring a property management company to handle these tasks.

Would you like help along the way?

If you’re just beginning your journey into building a garage apartment but aren’t sure where to start, these tips will provide a good starting point. However, we know it won’t answer all your questions.

If you want to work with a team you can trust to follow all the regulations, ensure construction is sound, and add value to your home, then schedule a meetup with the 6th Ave Homes construction team. You’ll work closely with them and our designers to design and build your garage apartment and add value to your home.

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