You love your home, but spacewise, you’re bursting at the seams. Building an extension seems daunting, but moving out of your fabulous neighborhood is off the table. Hmm … you do have that two-car garage; perhaps you should convert it into a kids’ playroom, an office or gym for you, or even an in-law suite.

A recent American Housing Survey showed that 80% of Americans have a garage or carport, yet only a fraction use it for parking. Let’s be honest: Most garages are packed floor-to-ceiling with sporting equipment, gardening tools, kids’ toys, and more.

But before you transform this area, think about how this reno will affect resale down the road. Nearly 30% of shoppers rate a garage as one of the most important home features, just ahead of an updated kitchen and open floor plan, according to a recent survey.

Don’t despair—we’re here to help you determine when converting your garage makes sense, and when it’s a definite no-go.  Converting a garage is often more affordable than adding on.  If you add on to your house, you’re going to incur some major costs. Think of all the cash you’ll pour into a new foundation, or what you’ll pay to retrofit a second story on top of your home.

“Typically, it’s more cost-effective to convert a garage or storage space,” says Derald Norton, president of BMF Construction in San Bruno, CA.

Indeed, depending on where you live, building an addition could run you anywhere from $20,000 to over $65,000. A garage renovation, on the other hand, comes in at $11,000 on average.

One caveat: If you want to go beyond the basics and add a kitchen or bathroom, your costs will inflate exponentially, cautions Alex Tsalagas, president of A D Construction in Boston.

“Most garages are made from concrete or cinder blocks, so you have to do some drilling to get pipes through, and then insulate to protect those pipes from freezing,” he says. 

Converting a garage can boost your property value…

When it comes time to put your home on the market, buyers don’t want to see your stuff jammed into every available inch. So if a garage conversion means extra psychological space to spread out, that’s a win, Norton says.

“In every case I can think of, converting from parking to living space has had a very significant positive effect on property value,” says Norton (whose business is in the burgeoning San Francisco Bay Area market, where space is at a premium).

But to reap the rewards, you’ll need to convert with finesse. In fact, a “well-done” garage conversion to living space can give you up to an 80% ROI, HomeAdvisor reports.

“The greatest increase in value and satisfaction will come from good design: building a space that flows naturally from the upstairs and looks like it’s part of the home,” Norton says.

That means making sure brickwork, windows, flooring, and lighting match the rest of the house.

… but buyers might prefer the parking space

However, when parking is at a premium, such as in urban areas, you might actually decrease the value of your home if you swap out your garage, Tsalagas says.

In certain parts of Boston, “parking is worth a lot more money than the square footage of the living space, unless it’s high-luxury,” he says. For example, a single-car garage can easily be sold for $300,000 to $400,000, he says, “so it’s definitely not a smart decision to convert when you have a parking space that will give you that much of a return.”

In rural areas, buyers prioritize garages

And keep in mind that in rural areas, or places where outdoor enthusiasts flock, garages are sacred spaces that are hard to replace, warns Dave Kimbrough, a Realtor in Grand Junction, CO.

“In places like western Colorado, outdoor lifestyle is king, so a garage is extremely important,” Kimbrough says. “Whether you kayak, paddleboard, river raft, mountain bike, ski, hike, hunt, or fish—all of that comes with equipment and everybody needs somewhere to put it. A garage in our marketplace is an expectation.”

Converting a garage can be a lengthy process

In certain areas, local zoning departments can slow down the process of converting your garage—it can take up to a year to get the proper permits. If you’re part of a neighborhood association or have a heritage property, it can take even longer.

And that’s before you can even start building! Remember: If the work is complex and extensive (i.e., you’ll need to raise the house to convert the garage), you could be looking at months or more of construction.

Your garage might not lend itself to conversion

Depending on how your garage was built, it might not be well-suited to become living space.

You’ll want to check if your garage is below, at, or above the adjacent grade, Norton says.

“Should the garage be below-grade, it becomes more complex and costly, because you may have drainage and waterproofing requirements, and might need a more involved insulating system,” he says.

Also ensure you have at least 8 feet of ceiling height, which is required for a habitable room. And if you need to excavate the garage floor to meet height restrictions, you’re looking at major bucks.

Want to forge ahead? Make sure the space can easily be converted back into a garage, Kimbrough advises, by keeping as much of the original structure as possible.