8 Benefits of Finishing a Basement

A Valuable Renovation for Property Investors

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Finishing a basement can add significant value to an investment property. It is often a blank canvas where you can add a bathroom, create leisure space or even make an additional bedroom. Basement remodels can also be affordable. Here are eight benefits of finishing a basement. 

1. Can Add a Bedroom

Finishing a basement can allow you to increase the size of the home. If the current home is only two bedrooms, you may be able to add one or even two additional bedrooms by finishing the basement space.

In most towns, in order for the space to be considered an actual bedroom, it must have two forms of egress, as well as a closet. Building a closet is simple enough.

Adding the forms of egress is more complicated. It often involves breaking into the foundation walls of the property to create or widen existing openings. The addition of the bedrooms, however, can add value to the property and help you appeal to a wider range of buyers.

2. Can Add a Bathroom

Just as finishing a basement can allow you to add a bedroom to the property, it can also allow you to add a bathroom. It can be a big draw to have a two bathroom home instead of a one bathroom home. Adding a bathroom will be more expensive than simply putting up drywall to divide other rooms.

You need to spend money on a plumber if you cannot do the work yourself, as well as on the various plumbing fixtures. Tiling the bathroom will also cost money.

While the initial cost may be greater when adding a bathroom, the functionality it offers to the homeowners may be an invaluable investment and therefore help you get the property sold quickly.

3. Add Value to Home

Finishing a basement will add value to the investment property. Although it may not be considered “livable square footage” by the MLS, it does offer a great return.

In the United States, on average, finishing a basement will give you a return of 70 to 75% of your investment.

For example, if you spent $1,000 on improvements, it would increase the value of the property by about $700. If you spent $10,000 on improvements, it would increase the value of the property by about $7,000.

4. Way to Add Space if Zoning Codes Don’t Allow Other Additions

There may be zoning restrictions on your investment property which prohibit you from making certain additions to the property. Often, you could not expand out because it would bring your property too close to the neighbors. You may not be able to expand upwards either, especially if the home is already two stories.

Therefore, this basement space becomes very valuable. It allows you to add functional space to the home without interfering with any zoning restrictions.  

5. Income Property

Whether you are trying to quickly flip the investment property or keep it yourself as a multifamily, finishing a basement can allow you to add a rental unit. Of course, this unit would have to be approved by the zoning department in your town.

Any living space would have to conform to local fire code. This usually means at least one form of entrance and two forms of egress.

Some towns will even require at least one dedicated parking space for each rental unit, so make sure you become familiar with your local code.

This rental unit can appeal to prospective buyers who are looking to lighten the load of their mortgage. The tenant’s monthly rent would essentially be paying all or a portion of their monthly mortgage.

If you are adding the rental unit for a property you are holding onto, finishing the basement will greatly increase the cash flow of the property. While basement units do not command as much as above grade units, you will still be able to receive a significant income from a space that would have otherwise sat vacant.

6. Add Recreation/Storage/Guest Space to Home

Although finished basements do not typically count when calculating the square footage of the home for resale purposes, prospective buyers love to see a finished basement.

Finishing a basement adds usable space to the home. An otherwise dark and dreary space can be transformed into a recreation area, kids play area, organized storage space or a little retreat for visiting guests. It is an unexpected pleasant bonus to buyers and they love the options that a finished basement gives them.

7. Do It Yourself

If you are handy, you may be able to save a significant amount of money by finishing all, or most, of the basement by yourself. Even if you have to outsource more complex issues, such as electrical work, if you are able to lay flooring yourself, frame out walls and put up drywall, you can still save a significant amount of money.

8. Don’t Have to Use High End Materials

People do not expect the highest end finishes in a basement. In fact, hardwood is a terrible choice for a basement, as moisture issues can cause it to warp. Therefore, you can save money on the caliber of materials you are using compared to the finishes for the rest of the home. People are just happy to have a finished functional basement with heat, light and flooring.