How Can I Convert my Garage to a Studio Apartment in Los Angeles?

Ready to make some money off that garage of yours? That’s right. Your garage can be worth a whole lot more if you stop parking your car and storing your old knick knacks in it. With some planning and investment, you could convert that garage into a studio apartment that you can rent out. 

How do I convert my garage into a studio apartment in Los Angeles?

While the process isn’t too terribly complicated, it does take some time. The first thing you want to do is determine if you want to convert your current garage into a studio apartment. If your garage is in good condition, you can easily convert it into a studio apartment. If your garage is a little worse for the wear, you may be looking at demolishing it and rebuilding from scratch. While this may seem like a huge undertaking, you’ll be left with a building that will last 100 years. 

Once you determine whether or not you will be starting from scratch, work with an architect to design your studio apartment. The architect will help you determine the layout of the apartment, from the kitchen, bathroom, living areas and any other features you may want to include. Think about ways to maximize that small living space, from including built in cabinets to Murphy beds and maybe even a breakfast nook. All these built-ins are design features that renters will appreciate in a small space. 

Here’s a pro tip. When choosing an architect, make sure you choose one with experience in converting garages into studio apartments. That will make the next step that much easier. 

Once you have your architectural plans in place, you need to submit them to your city’s Building and Safety Department. This is the agency that will approve or deny your plans. If you have been working with an architect with experience in garage conversions, this step should be very simple. This step is, however, a little time consuming. It could take up to 4 months for the Department of Building and Safety to approve your plans.

The last step in the planning phase is hiring your general contractor. Again, you want to make sure you hire a licensed contractor with experience in garage conversions. Talk to more than one contractor before choosing. Be sure to ask for references and to see any projects they are currently working on. That way you get a feel for how the process is going to be for you. While it does take a little extra work doing all these background checks, it can save you from major headaches later on. 

How much does it cost to convert my garage to a studio apartment in Los Angeles?

As with any major construction project at your home the cost of your garage conversion is going to depend on many factors.

• Will you be able to convert your current garage, or will you have to demolish it and start with new construction? This all depends upon the state of your current garage.

• Will you separate your utilities? You absolutely can separate the utilities (water, gas, electric) from your main home and the studio apartment. Doing so will probably add $10,000 for separating the water, $15,000 to separate the electricity and $5,000 to separate the gas. Because the cost of separating utilities is so prohibitively high for most homeowners, they usually opt to just include the price of utilities in the rent that is charged. 

• What extra features will you include in your design? While renters will love extra add-ins like a built in breakfast nook, built in shelving and drawers, and a Murphy bed, these features will all add extra costs in the construction. 

That said, a garage conversion is going to cost about $90,000 to $120,000.

How can I pay for my garage conversion in Los Angeles?

The price of an ADU may be surprising at first. In fact, when ADUs were first legally allowed in California, the cost alone was prohibitive to all but wealthy homeowners. Fast forward a few years and ADUs are financially feasible for most homeowners. No need to worry. There are ways to pay for your new ADU without breaking the bank.

Home Equity Line of Credit

As a homeowner, you are probably already paying off your mortgage or you own your property. Either way, you can borrow against the value of your home.

One of the most common ways to borrow against the value of your home is through a home equity line of credit, also known as a HELOC. This is a line of credit secured by your home that gives you a revolving credit line to pay for large expenses. 

To qualify for an HELOC, you need to have equity in your home. That means, the amount you owe on your home must be less than the amount your home is worth. You can usually borrow up to 85% of the value of your home, minus the amount that you owe. As you repay your HELOC, the amount of available credit is replenished, meaning you can borrow that money again, as needed. You can typically draw money from your HELOC for about 10 years.

Cash-Out Refinancing

Another way to pay for your ADU is through what’s called a cash-out refinancing of your mortgage. With a cash-out refinancing of your mortgage, you will get a lump sum payment. How? 

Basically, you replace your current home mortgage with a new one. This new home mortgage would be higher than your current home mortgage. Then, you can take out the extra money and use it towards your ADU. 

This is a great option when interest rates are low, especially if interest rates are lower than they were when you purchased your home. Also, the money you collect from a cash-out refinance isn’t considered income, so you don’t have to pay taxes on it. Instead of being considered income, the cash out is considered to be a loan. 

Construction Loan

Yet another option is a construction loan. One of the many benefits of building an ADU is that it increases the value of your property. That makes it appealing to banks, who may give you a construction loan. With a construction loan, you would refinance with a mortgage that reflects the house's estimated value after you construct your ADU. Many lenders provide mortgages that cover up to 80% or 85% of the remodeled home's value.

With a construction loan, your bank will first assess the value of your property. Then, an appraiser will calculate how much they believe your home will be worth after an ADU is built. The bank will also take into consideration how much it will cost to convert your garage. Once all those factors are determined, the bank will provide a certain percentage of that difference for you to finance the cost of construction. 

With a construction loan, the bank plays a larger role. The bank approves the general contractor selected by the homeowner. Then, the bank releases money at various stages in the construction process, which may involve an inspector verifying the progress. While these inspections may involve fees, this approach protects both the bank and the homeowner, who may not be familiar with how to oversee a major home construction project. 

Ready to convert your garage into a studio apartment? Call the professionals at Granny Flats Design at 818-532-0482. We can help you, not only with your architectural designs, but also with financing your new garage conversion.