Turn your empty space in your home into a rental apartment for additional income. For much less than building a rooming house, you can remodel a room in your house into a “accessory” apartment.

Converting the space of the house into an apartment can be especially useful for investors, since few investments can compete with the yield of an additional apartment. The monthly income can be 2 or 3 times the monthly cost of the loan to install it.

These “accessory” apartments are also called guest apartments, in-law apartments, family apartments, or secondary units. They are completely self-contained living facilities with separate cooking, eating, sanitation, and sleeping facilities that are located within an existing single-family dwelling or in a separate structure on the same lot as an existing dwelling. Because it is the least expensive option, I focus on the apartment that is added to an existing home.

Accessory apartments can be located in any part of the house depending on the availability of usable space. Spaces that have the greatest potential to become accessory apartments include:

  • penthouses
  • Part of the basement of a divided hall house
  • Basement areas to go out
  • Attached Garages
  • Finished living areas in any part of the house
  • Houses that will aesthetically fit a small extra room.

Technical considerations

Some of the things you will need to consider include estimating costs and income, financing, zoning and building codes, and becoming a homeowner. In addition, it will need to include a bathroom and a kitchen, although a kitchen does not have to be too complicated. It may consist of a refrigerator and microwave for a smaller apartment.

You may also need to set up separate utilities for the apartment, to comply with local regulations. Also, separating the accessory apartment from its own private area will probably mean a separate entrance for tenants.


The New York Times reported (July 7, 1991) that when two schoolteachers, Nicholas and Gayle Mancuso, built their new home, they added a two-bedroom apartment to help with expenses. They rent the apartment for $650 a month, including utilities, which helps offset their $1,850 monthly mortgage and tax bill. The apartment cost about $10,000 to build, so after 16 months it had paid for itself.

Studies in Minnesota in 1982 estimated that costs to convert vacant space into apartments ranged from $26,400 for a “fully outsourced” job (an unfinished attic requiring extensive remodeling work) to as low as $9,940 for a two-bedroom apartment. bedrooms in an old two-story house for an experienced do-it-yourselfer. Estimates for do-it-yourself labor conversions were $15,520 and $17,985 for split-entry and basement conversions, respectively. Asphalt parking spaces were estimated to cost $500 per space.

Average monthly break-even rental costs, assuming modest do-it-yourself work at the time of remodeling, were estimated to be $228 for a second-story accessory apartment in an older two-story house; $274 for a split ticket conversion; and $302 for a base apartment.

Copy what others have done

Look for newspaper ads to find other converted apartments. Then stop by and see what they look like. Feel free to copy what other people have done. Here are a couple of ads from my local paper: “Furnished studio apartment includes utilities $475/mo + deposit no pets” or “Room for rent w/private entrance w/bath $400/mo includes utilities.”

Proactive Responses to the Recession, Part 3 – Accessory Apartments

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