Garage Construction & Rental

We have a massive lot where there is a duplexed home and the majority of the lot is empty unproductive land... undeveloped unproductive land is extra land on which we pay property tax on. That sucks.

I went to the city to ask for this particular lot to be considered zoned to allow at the very least a triplex or a fourplex, realizing that this empty land isn't maximizing it's "highest and best use" of that part of the property.

But the city won't grant anything more than a duplex. They went on to basically say I'd be wasting my time filling out the paperwork to try & make it happen.

It is for Property SIX. It is zoned a duplex and it is actively used as a duplex so I've fully maximized it's potential.

Or have I?

Property SIX does not have a garage. The city said that I could add a garage, which made me consider the following:

1. In trying to make the highest & best use of the property, I could add a garage and rent it out.
2. In adding a garage, I could use my concrete workers connection that has been used to create the concrete steps at Property SIX to extend to the end of the large lot and construct the foundation (more concrete) from there.
3. The garage can then be constructed for total costs of about $40,000 I'm thinkin'. This would be borrowed funds leveraged from one of the other recently renovated properties via private investor. At 10% interest rate this equates to monthly payments of $333.
4. The $40,000 would be used to create a ranch like house (er, *ahem* "garage") with a main floor kitchen, bathroom & living room, then two additional rooms upstairs. Landscaping & parking in front.
5. Advertise "cute & unique 2 bedroom private home for rent $850 a month". Instant positive cash flow of $500 a month to be applied to other investments.
6. Rent the property using a warehouse garage lease, NOT a residential lease.

Lots more to consider of course, this is just rough idea of plan...

Why do this?

Why not just use that $40,000 as a down payment on another property? Good question to consider...

For one, just using it as a DP on another property would likely result in breakeven cashflow at best. And legal fees. And mortgage set-up fees. New property taxes, new ownership change fees, blah, blah, blah.

In this case, the $40,000 would generate approx $500 a month in positive cashflow right off the bat, even more if I go through a bank at 5% interest rate instead of a private investor.

And at this point I have net-worth trending in the right direction and set-up to continue going in the right direction. I don't have any freedom right now.

Paying all cash from our $40,000 savings to construct this, and then renting the place for $850 a month means that we would get our $40,000 back in 47 months, or approx 4 years. Thus, after 4 years we would have our $40k money completely back and would be collecting $850 a month for free (minus tenant headaches, maintenance, hassles etc...).

Freedom is the name of the game and $500 is a step in the right direction in the plan to replace existing emplyment income...