I think its a good idea. In the near future when self-driving cars become more prevalent, more and more people are going to look to repurpose garages that used to be for cars.
You’re looking at significant cost to build all of that. Probably $10,000-30,000 depending on how you did it. It would probably add to the value of your property but I’m not sure how much.
Where does your main sewer stack come down in your house? If its on the side of the house thats facing the garage, you could rent a backhoe and dig a trench 2-3 meters down from your garage to the house. Then you could lay PVC sewer pipe and connect it to your sewer main. You mentioned there’s an elevation difference so that could complicate things if the stretch is too long or the slope isn’t steep enough.
Once you lay the sewer pipe, you cover it with a little dirt and then lay a ribbon identifying it as sewer. Next you lay the fresh water pipe from your house to the garage here. Cover it with dirt and lay another ribbon. On top of this you can run your gas line. Finally on top would be your electric. Your main electric panel and gas regulator would probably need to be changed out too.
A challenge you’re going to have might be that the floor is going to be cold since there’s no crawlspace or insulation under a garage floor usually. You might consider installing radiant in floor heating but keep in mind you’ll be wasting a lot of that heat by sending it into the ground with no insulation. If I had to guess, I’d guess you don’t have enough headroom in the garage to add a subfloor or build up on the existing floor much.
You could hire unlicensed handymen to do the work and not pull permits or get inspections. In case of a total loss, you might not be covered by your insurance however so you’re taking on some risk there. The other thing you could do is go ahead and build the garage out to the specification you want but leave out the utilities, get permits for the framing and get it inspected. Then after its inspected, you could build out the kitchen and bathroom. This would probably increase your taxes but you’d probably be covered by insurance then and if the neighbors complained or something, you’d at least have some record of a permit pulled. You’d have to make sure the local government doesn’t figure out that you’ve added the bathroom and kitchen after the fact though. That can be hard to do if this garage is attached to an alley and they could just stroll on up and look in a window or knock on the door and ask your Airbnb guests.
If you got caught, yes they could make you tear it all out worst case scenario. Or they might just ask you to get permits and get the work inspected but forbid anyone from living in there. You could ask for a variance and it’d probably depend on if your neighbors approve of it or not.
So really your biggest problem here is people. Without significant privacy, this is going to be difficult to do without much risk of trouble for you.