Create a budget and a time frame before you begin. Estimate how long it will take for you to realize a return on your investment if you're adding an apartment for extra income. A mother-in-law suite for an aging parent may present accessibility issues that you'll need to take into consideration and which will probably add to the cost. Studying building codes, pulling permits and allowing inspections of your finished work are critical. Rough out a design, to scale, and make sure it's doable when you take plumbing and electrical into account.
Plumbing might be the most difficult aspect of adding a garage apartment. If the garage is already plumbed for a washer and dryer or for a work sink, the existing plumbing can be adapted for the apartment by a plumber or handy homeowner. If it's not, then a contractor must run plumbing to the garage. Many garages have electricity, so this isn't usually as big an issue as plumbing. Make sure you or your electrician add circuits and breakers to carry the increased load, especially if you're adding electric heating.
In all likelihood, you and your tenant will prefer a private entrance to the apartment. Add a door with a small covered deck or porch to a ground floor apartment. Second-story apartments will require an outside staircase, ideally with a covered landing to provide protection for your tenant as she gets out her keys or sets down her groceries. Check your local building codes to see if the apartment must have more than one exit.
Garage apartments are typically small, so plan an open layout. Build a galley kitchen along one wall. If there's room, build an island parallel to the kitchen wall. Place the bathroom near the kitchen to reduce plumbing costs. Add windows if the apartment only has a couple -- the extra light makes the space seem larger. Don't add bars to them, because your tenant may be trapped inside in a fire. Use other security methods if the apartment is in a dangerous area. Situate a closet near the entry and add a closet storage system so it can do double duty for coats and clothing. Install durable but easy-to-clean flooring.
Good insulation, uncommon in most garages, is essential to efficient heating and cooling. If the existing space has bare studs, add insulation before you hang drywall to create finished walls. Consider blown-in or foam insulation, installed by an expert, if you plan to use the existing walls. Insulate around windows and the front door. If your apartment is in a moderate climate, a wall heater and window or wall air conditioner will probably suffice and won't require additional ductwork. Baseboard heaters are an option in cooler climates. Adding an HVAC system to a garage apartment is expensive, so calculate whether or not it's cost-effective.
A small apartment benefits from some space savers, and a tenant or guest is grateful for the designer's thoughtfulness. Murphy beds and dining tables fold into the wall when they're not in use. If the roof slopes at the sides of the apartment, add built-in cupboards in the eaves for storage in an otherwise unusable space. A very tight kitchen benefits from a dorm-sized refrigerator and a drawer dishwasher. Cubbyholes by the entryway create space for shoes and umbrellas.