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Considering renovating your home? Does that include your basement? Does renovating a basement pay off? Read on as we tackle this conundrum.
Deciding whether to buy and move to a new home or renovate your existing property? The choice is yours, but we would suggest maximizing your return by improving your home through a basement renovation. Basements are great to have some extra square footage that can be used for multiple purposes. They can be used as storerooms or additional living spaces. Hence, basements are great if you want to maximize the utilization of your existing home.
Return on Investment
Renovating the basement is not only worthwhile if you want an extra living space for yourself, but it will also increase the resale value of your home; hence it is another way of generating a return on your investment. It has been estimated that you can quickly recover as much as 70% of the cost you have spent on the basement at the time of resale. In other words, let’s suppose you spend $30k on renovating your basement. Based on this guideline, you can quickly recoup $21k on it. This is a good return compared to the return that can be achieved from other home renovations.
As also mentioned above, renovating your basement can be a good return generating investment. A ready-made basement with up to date modern features will make your house more competitive on the market for potential buyers; hence it will be easier and quicker to sell it.
Selling is only one way of generating a return on investment, though; the other way is to rent out space. If you have the basement and you don’t know what to do with it, then you can better rent it out to have an extra source of income. Renovating it will make it easier for you to get good quality tenants easily and in a short amount of time. Besides generating some additional income, you can also rent out the basement to cover your mortgage or other living expenses.
Important Factors for Renovating the Basement
Basement renovation costs range between $14,000 and $82,500.
It is important to note that renovating a basement that is already done is more costly than renovating an unfinished basement since in the latter scenario, you don’t have to demolish anything. On a high level, it all depends on the size, space and materials used. While renovating your basement space, it is important to budget for factors such as arranging the electricity, drywall, plumbing, waterproofing and basic flooring.
If the basement is going to be used for living purposes by either the owner or the tenant, then a bathroom can also be added to it. As per HomeAdvisor.com, installing a bathroom will cost around $10k to $15k. Another cool thing about basements is that you can have a separate entrance gate after securing the required permits.
Important Non-financial Factors
We have discussed the financial benefits of renovating the basement, but certain key factors should be noted to maximize that return. The neighborhood in which you live plays a significant role as each the real estate dynamics are different for each area. If you want to resell your home, you should know your area’s demographics such as the size, age, and style of your home compared to these other properties. The renovation should be done accordingly; otherwise, you may over-renovate or under-renovate your basement with the customization or the features that are not required or are not in demand.
Maintenance of the Basement
You have spent the money and have made all the effort to renovate your basement but if you are not maintaining it such as it has drainage issues where water is leaking or the cleanliness is not ensured, the windows are rusty, or there are signs of moisture then this will decrease the resalable price of that basement. Another critical point is if you have renovated the basement with the intention to sell it then it is better to do it quickly. As many upgrades and style choices are valid for the time being and after that new fashion kicks in and tastes have changed. Maintenance, such as painting both interior and the exterior, should be done regularly to keep the property marketable. Basements should be given special attention as they have more chances of getting moisture and water leakage.
We have very thoroughly discussed basement renovation costs; we started with talking about why having a basement is often a better idea than buying a new house or moving to another one along with talking about the return on investment that can be generated in the form of either selling it or renting it. The article also talks about the non-financial aspects of generating the investment return. It discusses the factors related to the neighborhood’s demographics or the change in fashion to the regular maintenance of it; all these factors impact the value of the property.
While renovating your basement is a good idea, think carefully about the costs involved and plan for them. In doing so, you’ll be more likely to generate a positive return from your efforts.
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