Should You Convert the Garage?

Should You Convert the Garage?

In Phoenix, the numbers say: probably not.

A garage conversion seems almost too obvious. Take 400 square feet that currently houses a car, boxes and a bicycle nobody rides, add insulation and air conditioning, and turn it into living space. Phoenix houses sell for hundreds of dollars per square foot. How could that not create value?

That was more or less my assumption when I started looking at this. It turns out I was wrong.

The problem is the price-per-square-foot calculation. If a 2,000-square-foot house sells for $500,000, it is tempting to conclude that another 400 square feet is worth $100,000. It isn't. Buyers are paying $500,000 for the whole package: the location, lot, bedrooms, bathrooms, condition and, importantly, the garage. The next square foot of living area is worth less than the average square foot already there.

So we went looking for the other side of the equation: what is the garage itself worth? Using Maricopa County property and sales records, we analyzed about 139,000 single-family sales from 2022 through 2026. We compared houses while accounting for things such as living area, parcel size, age, pool, construction, location, and when the property sold.

The answer surprised me. In central Phoenix, a two-car garage appears to add about 13 percent to the value of an otherwise similar house without one. In the established suburbs, the premium is about 7.5 percent. In newer outer suburbs, it is about 7 percent. Rural properties are too varied to give us a number I would trust.

Those are big numbers. On a $450,000 suburban house, a 7.5 percent garage premium is roughly $34,000. You do not get to convert the garage and keep that value. It goes away.

Now add back the value of the new living space. In central Phoenix, the math is particularly tough. A typical two-car house in our sample had about 1,840 square feet. It would take roughly 600 additional square feet of living area just to replace the value lost by eliminating the garage. Most two-car garages are smaller than that. In other words, you can convert the entire garage, spend money doing it, and end up with a house worth less than when you started.

The suburbs are closer, but still not especially attractive. In an established suburb, converting 400 square feet might create about $12,000 of additional value after subtracting the value of the lost garage. In the outer suburbs, the number is around $10,000. Neither looks very exciting when a good conversion might cost $30,000.

There are, of course, exceptions. A 1,100-square-foot two-bedroom, one-bath house with an oversized garage is a different problem from a 2,200-square-foot four-bedroom house. If the conversion turns the first house into a legitimate three-bedroom, two-bath home, the extra bedroom and bathroom may matter more than the raw square footage. Likewise, converting one bay of a three-car garage while keeping a normal two-car garage can make sense if the new space solves a real problem.

And that is probably the useful rule. Do not convert a garage because living space sells for more per square foot. That is the wrong comparison. Convert it only when you are using relatively low-value space to fix a relatively high-value deficiency in the house. If you need more space, a newer solution is an ADU.

For the ordinary Phoenix three-bedroom, two-bath house with a two-car garage, the answer is simple: leave the garage alone. The market likes it more than you might think.