We have a 2-car detached garage. Our initial thought was to add on a second story as a guest apt., but everything I read tells me second story additions are cost prohibitive. The garage currently has electricity, but not plumbing or HVAC. Would it be less costly to to add a second story or add additional square footage on the ground floor?
Cathryn, a general rule of thumb in the remodeling industry is that it's usually cheaper to go up than out. The reason is that the excavation and foundation work needed for the project has already been done. Applying that theory to your situation means that putting a second level living space on your garage should be less expensive than increasing the footprint of the existing structure.
However, before getting too far along in the planning stage, there are a few issues that should be addressed. The first is whether a second or first floor expansion would be in compliance with your local zoning regulations. Many jurisdictions have height restrictions and almost all have front, back, and side setback distances that must be maintained. A call to your local building department should answer those questions. If for some reason you can't add a second level, check to see if there are any easements on your property that might restrict a first floor addition.
The second issue is whether another bathroom can be added to your house. If you're on a public water system, it shouldn't be a problem, but if you're on a well and septic system, you'll need to clear the additional bathroom with your local health department.
From what you describe, it doesn't sound to me like adding a second floor apartment on to your garage should be too complicated. The existing roof framing will need to be removed, floor joists installed, and then new walls and a roof constructed. The new living space will need to have a fire separation from the garage, but that can be done with Sheetrock.
You already have electricity, and more than likely it's a 200 amp panel, so there should be enough spaces to add a few new circuits. If the panel is full, you may need to add a sub-panel. HVAC shouldn't be a problem either as a small unit can be installed to condition the new living space. The one mechanical issue might be tying the apartment's drain lines into your existing drain system, but I would think that a local plumbing contractor should be able to come up with a solution.
You will definitely need drawings to obtain a building permit and they can be done by an architect, or if your local building department allows it, a draftsperson. Whoever you hire should make a site visit to take measurements and do a brief inspection to ensure there aren't any issues that might complicate the project. They can then do a few preliminary computer drawings that show what's possible and provide an approximate cost for the job. The key word here is "approximate" as the best method to arrive at some firm remodeling prices is to have at least three reputable contractors submit estimates based on the final drawings.