Updated: May 7, 2021
With the current market in a frenzy, it is frustrating for new investors to get started with over asking bids and cash offers beating buyers out on properties. If the situation is right for you or you are out there looking for a place, consider basements as a source of income. Hear me out on this. In all the places I have lived, they had some type of finished basement. Some were good, some were bad. What I do know is it is now a trend. I have talked to countless contractors that have given up other types of work just to specialize in remodeling basements. Why? Because the cost to upgrade your house right now makes more sense than competing with the market.
If your current place has a basement that isn't finished or just not finished well you are leaving square footage unused and equity on the table. If you are handy this is a great place to apply your skills.
Things to think about:
Flooring - Basements typically are concrete slabs. These slabs breathe and are cold. I am not a fan of carpet in the basement due to moisture that basements are susceptible to but it solves the problem of cold. I like to use something that is waterproof, mold-resistant, economical, and has some insulation properties. I have found LVP, or luxury vinyl planks to work the best. The key is the underlayment that you use. I am very happy with DMX one-step underlayment as it allows the floor to breathe with slight dimples that promote airflow and reduces the risk of moisture build-up as well as creates a vapor barrier, so your floors stay a bit warmer and away from moisture.
Tools and material list:
Flooring - Make sure when calculating that you add 10-15% for waste.
Baseboard and trim - This can sneak up in cost. I have had luck in reusing existing trim if careful in the removal.
Underlayment - one of the most important pieces to long-lasting installation.
Floor Leveler - Used if needed when imperfections are found on the floor.
Flooring install tool kit - Can be found at Harbor Freight for cheap.
Miter Saw or circular saw - For trim board.
Utility Knife - LVP can typically be scored and then snapped. This saves time and mess.
Air nailer and compressor (not needed but will speed up process) - For trim.
Depending on your location your basement could command a substantial part of your mortgage. A 750 square foot basement with updated floors, paint, bathroom would go between 700-1200 month in the Denver metro area. I typically include utilities in the rent as it makes things easier in the long run. If you have $10,000 invested and rent for $900/mo you just made 108% of your money back in one year. Not to mention you will likely have more equity and market appreciation in your home. There are also tax benefits when you turn your home into a rental as well. All of this is a hidden cash flow that a lot of new investors fail to look at.