Currently, we do not have an apartment over our garage. We have talked about it tirelessly. But, we have never moved on it. By our rough estimation, it would cost nearly $30,000 to build, which for us, would be a significant investment.
Build Out $30,000
Rent $ 500
Payback 60 months
For the size of apartment that we would be able to build over our garage, the current market rate is around $500.00. Given that rate, it would take 5 years of rental charges to earn that investment back, 5 years before we would begin to see a profit.
For us, right now, that is a bit too long term. Given our financial philosophy, we are unwilling to take out a loan to pay for the work, so it would be several years before we could commence with the project. If we had an extra $30,000, it would be smarter for us to pay extra on the mortgage or to apply to a recast, so that our savings would be realized now.
In addition, we may not be in this home for another 5 years. Our goal and plan at this stage of the game is to increase savings and continue to pay a bit extra every month on our mortgage in order to cut down on the length and total interest paid over the life of the loan. Once we move, we would like to turn this home into a rental.
As much as I want a garage apartment, realistically I know that at this time it is not a smart decision.
That is why I am so passionate about personal finance, because it is personal. There is no right or wrong answer because we each have our own goals and plans.
What would you do? Would you build it? Do you have a rental? What are the pro's of owning a rental? What are the con's to owning a rental?