Can Garage Conversion be Profitable?

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Yes, garage conversion can be profitable for property owners. This is especially true if the main purpose of converting the garage is to make profit in the first place.

Although remodeling a garage into an Accessory Dwelling Unit (ADU) might seem expensive at first, there are various ways that it can truly be a profitable investment. Are you wondering how converting a garage can be profitable?

There are various ways that a conversion can be profitable.

How Can Garage Conversion be Profitable?

Some ways that garage conversions can be profitable are listed below.

Financing the ADU and Renting it Out for a Higher Monthly Price

One main way a garage conversion can be profitable is if it is financed rented out for a monthly rent price that is higher than financing cost.

In this case, if the property owner finances the payment and pays less monthly for the monthly financing price compared to the price of rent received from a renter, the difference in money would be profit.

For example, if a property owner finances the job for $450 a month, and rents the unit out for $1000 a month, the property owner will make the difference in profit every month, which would be $550 profit per month in this case. After the financing is paid off, the monthly payment of $1000 in rent can be counted as full profit.

Paying for the ADU in Cash and Renting it Out for Monthly Income

Another case that a conversion could be profitable during a situation where it’s to be rented out is if the project is paid off in full up front.

In this case, a certain amount of months of renting out the unit would pay off the cost of the project. Then the payments of rent for the months thereafter can be considered profit. Therefore, if a homeowner spends $24,000 on a conversion, and rents the unit out at a price of $1000 a month for two years, the $24,000 cost will be covered in two years and then the income from months of rent thereafter can be considered as profit.

Increasing a Home’s Selling Price by More Than the Cost of Conversion

Another simple example of how a garage conversion can be profitable is during a situation where the house is to be sold.

If the is if a property owner spends less on the job compared to how much they increase the selling price of the house, the additional difference would remain as profit.

For example, let’s consider a situation if a homeowner were to pay a construction company $20,000 to convert their garage. If the homeowner increases the selling price of the home by more than the cost of the conversion, the additional money would be profit. If they spend $20,000 and sell their home for $60,000 more than the original price they would have sold it for if the conversion hadn’t taken place, the homeowner would make $40,000 profit as a result.

This is not investment advice. None of the information provided on this article should be taken as investment advice.

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