A full-scale apartment or guest house will take you to the top of your budget and beyond at an average between $15,000 to $30,000. You'll need to make all the upgrades mentioned for a family room, along with a separate bath and kitchen. You'll need to run a gas line or a 220 outlet for the stove. You'll also want a private entrance for your apartment, which usually entails adding a fire door.
Paint manufacturers have recognized these problems and have come to the rescue with new solutions. But a word of advice: If your garage floor sees heavy water leakage, if it's badly cracked or if it's damp and slimy all summer, don't apply any coating. In those cases, you're better off simply keeping it as clean as you can and then calling it quits.