MARTIN DASKO, JANUARY 16, 2024

Home renovations have become more common over the last few years, with more people working from home. According to the National Association of Realtors (NAR), Americans spent $420 billion on home renovations in 2020. The 2022 Remodelling Impact Report included a basement conversion to a living space as one of the top-four projects regarding the return on investment. Finishing a basement outperformed other home projects like renovating the bathroom or the kitchen, and it returned up to 86%.

If you’re looking to sell your home in the near future, you may want to consider making certain upgrades to your basement to help increase its value. What renovations can people make to their basements to add value to their homes?

Turn the Basement Into a Living Space

“One of my favorite basement renovations is turning the area into a separate living space,” said Aja McClanahan, a 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, a top agent at Christie’s, echoed a similar sentiment:

“Having a finished basement can certainly enhance your living space. 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 liveable and usable the basement is, the better you will do on increasing your home value and equity.”

Create a Multifunctional Space

“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.

Turn Your Basement Into a Rental Unit

Your final option for a basement renovation is to turn it into a rental unit by updating the space so that you can list it as an apartment or a 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.

Basement Renovation 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.

Basement Renovation Costs

Before you turn that basement into a living space, you should look over the costs so that you know what you’re getting into. According to Angi, a contractor-search service, 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

It’s worth mentioning that these expenses could pile up, so you’ll want to ensure that you have enough money budgeted for this renovation.

Closing Thoughts

Your unfinished basement could be a source of rental income or help you 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.