3 Smart Basement Upgrades That Pay Off at Resale
Home renovations have become more common, with basement conversions being among the top projects in regard to return on investment.
If you're looking to sell your home in the near future, you may consider making these three upgrades to your basement to help increase its value.
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1. Living Space Conversion
"One of my favorite basement renovations is turning the area into a separate living space," said Aja McClanahan, financial writer and real estate agent from Space Coast Move HQ. "This means you'd need a separate entrance with at least one bathroom and a kitchen area. If you've got the space and the budget, this project works well to force appreciation when it's time to sell and earn rental income."
Adding the elements required to turn an unfinished basement into a living space creates additional opportunities and makes the property more appealing to prospective buyers. If the basement is completely unfinished, you must look into upgrading it to add more living space to increase the listing appeal.
Lindsey Harn, top real estate agent at Christie's, concurred with, "Having it finished and equipped with heating and air, a finished floor, drywall, and even perhaps a bathroom will definitely increase the value of your home. The more livable and usable the basement is, the better you will do on increasing your home value and equity."
Estimated Cost
Before turning your basement into a living space, you should look over the costs. According to Angi, a contractor database for booking services, the average cost of a basement finishing project is $32,000. On the low end, you can pay $2,800; on the high end, it's $100,000. The price of the basement renovation will depend on the materials, size, labor, permits, appliances and the state of your basement.
Here are a few additional expenses to keep in mind with a basement renovation:
Mold removal
Waterproofing
Repairs
Painting
New windows and doors
Flooring
Drywall
Insulation
Electrical
Plumbing to ensure that the washroom functions properly
These expenses could pile up, so you'll want to ensure that you have enough money budgeted for this renovation. The amount you pay will also depend on the square footage and if you want to add additional rooms.
2. Multifunctional Space Conversion
"Depending on the size of the basement, you can never go wrong with creating a multifunctional space with a huge TV area, a gym, a bar, a guest room, a kid's den, a bathroom and so on," said Rinal Patel of We Buy Philly Home. "This multifunctional space will not only improve the quality of living or be a good investment when the time comes for resale, but it could also serve as a place to spend quality family time, relax, chill and host family gatherings."
If you're uncertain about what to do with your basement, you can go with multiple options by adding a home gym and a guest room to have various options for how the space can be used.
Estimated Cost
According to Forbes, the average cost to complete a basement is around $22,850, but it ranges from $4,700 to $41,000. The average national cost to finish a basement bedroom is $18,400, so if you wanted to add a separate guest space and a home gym, you would have to spend the money on two rooms. The final cost would depend on how many rooms you wanted to add to the space.
3. Rental Unit Conversion
Your final option for a basement renovation is to turn it into a rental unit by updating the space so you can list it as an apartment or short-term rental on Airbnb. This will be a different project from turning it into a living space because there are unique regulations for turning a space into a rental unit. You'll have to look into local zoning regulations to ensure everything is up to code.
Even if you don't choose to rent out the space to a tenant, you'll increase the home's value when you list the property because prospective buyers will view this as an investment property. With platforms like Airbnb available, you can also list this space when you want to bring in some additional income.
Estimated Cost
To turn your basement into an Airbnb rental unit, you'll need to remodel it and allocate additional funds for furniture. HomeAdvisor's website noted the average cost is around $61,000. This would include adding a kitchen space, bathroom and laundry room. If you want to add high-end appliances and include a separate entrance, you could easily spend up to $110,000. Then, you would also have to spend money on furnishing the place for Airbnb, which would be at least $2,500 per HomeAdvisor.
Additional Considerations
Before you spend a significant amount of money on renovating your basement, you must conduct your research to ensure that it's worth doing so.
Here are a few things you'll want to look into:
How much will the renovations cost? You'll want to gather quotes from multiple contractors to see your options to ensure you have the funds required to complete the project.
What is the state of your basement? There's a major difference between the costs involved in remodeling compared to completing an unfinished business.
How much will the value of the home go up? You'll want to review comparable listings in your community to see how much properties have sold for with a finished basement compared to an unfinished one. You want to ensure that this project will be worth taking on.
How much is the rental income worth for this type of listing? You should try to look through rental listings to see how much you could bring in with a monthly rental income.
You'll want to conduct a sufficient amount of due diligence so that you know what you're signing up for.
Your unfinished basement could be a source of rental income or help sell your home for more when you're ready to move. However, you'll want to gather quotes on the costs of renovating your basement so that you're not in over your head with this project.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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