Greetings Real Estate Investors!
Today we are going to discuss a topic that is near and dear to all of our hearts: more profits!
One of the most overlooked ways to maximize the profit potential of a single family home is to convert a garage or portion of the home into an efficiency. You can increase your profits while keeping your maintenance costs about the same. On the downside you might turn away some tenants. Lets see how it would work and look at both sides so you can see if would be a good idea for you.
How you can do it…
You would really need a garage, either one car or two. Or some kind of structure that is external to the main home. It is also possible to add an external door to a bedroom that could be accessed from the parking area but this is a bit more intrusive to the main house tenants. The most important part of this is completely seal any doors that allow access from the efficiency to the main home. We are not talking deadbolt doors but actually sealing and finishing a wall in between the two units. This would probably cost you around $500 to do correctly. The other thing you would need to do would be to have some kind of plumbing for a kitchen and a bathroom in the unit, this would cost a bit more if you do not have anything already in there, somewhere between $2000-$5000 depending on how nice
Why you would do it…
Money. A one car garage livable unit will earn you at least $500-$700 a month and a 2 car garage sized unit would earn closer to $800-$1000. So even if you were to spend the max on the range you would still make that up and more within the first year. Another reason is stability for your income because even if one tenant moves out you would still have the other unit providing income until you can rent the other unit out.
Possible downsides…
The loss of privacy and square footage for other tenants might mean that you will actually get a bit less in rent for the main unit. However, the loss would probably not even equal half of the new profit you will be getting from your new unit. The other reality is that this conversion process would be more difficult if your tenant has already rented out the whole house and is using it. It would work better when you are changing tenants and just advertise to the new tenant what would be happening. Another concern would be how strict your county or municipality is on permitting for this kind of work. And finally you want to make sure only to do this in a neighborhood where renting out efficiencies is common. It happens a lot in Miami-Dade but not as much in Broward where more communities are gated.
In the end…
It is worth considering depending on the type of property you own. It could mean more profits and a type of diversification for your investments that can reduce exposure for vacancies. If you would like to discuss your options more or have any other real estate investment questions, please contact us at 305-517-3900.
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