>> Feb 17, 2013
If you are already in your new house and you have done the touch-up jobs that we all hate thinking about doing, one of the first questions that always comes up is, ‘Should I finish my basement?” It is a tough question, depending on what you are trying to get out of your house or what you think you might have planned for the house in the future.
Is your new house something you will be in for five years? 10 years? Forever? Those questions are critical right off the bat in determining whether or not to invest money into making your basement, your ‘man cave’, or just an extra room to entertain friends and family.
Regardless, if you are going to take on the project like many of us have done so, either by trying it ourselves or hiring a contractor, you might want to take a quick look at a real estate investing course to gauge your thoughts on the how-to’s and what-to-do’s.
That being said, let’s take a quick look at whether the investment is going to give you a good Return On Investment, or ROI. Return On Investment is pretty self-explanatory, but you have to be careful before diving into this project to see if it really will make it worth your time and money.
Here are some of the key topics you should mull over before starting the ‘man cave’:
Value of the Finished Basement:
A finished basement will no doubt add value to your home, because it can’t hurt having more space and room, but you need to make sure it is enough to result in a profit. The space is typically large enough, something similar to a couple of rooms combined on the main or upper levels, so it does add great value for the opportunity for an extra bedroom, playroom for the kids, or a nice entertainment area when having the guys over. No question it has its plusses, but it is important to figure out if the money you are putting into it will help on the back end.
Cost vs. Value Report:
In the latest version of the Remodeling Cost vs. Value Report (2013), the overall average cost-value ratio improved, reaching 60.6%. Additionally, cost-recouped percentages were up for all 35 projects in their survey. That being said, according to Remodeling.com, the average cost of a basement remodeling was $61,303, which carried a higher-than-average cost-value ratio (70.3%). Regardless, the basement remodeling is still one of the least expensive ways for homeowners to add space to their house.
Despite the basement remodeling being one of the cheapest investments in order to make the biggest improvements in your house, the extent of your project will incur many costs, most of which will probably not be recouped if and when you plan to sell the house. When you factor in the insulation, carpeting, lighting, heating/cooling, furnishing or electronics, as well as a possible half or full bathroom, that is going to dig into your pockets a ton on the front side of the project. Will it be worth it in the long run?
If you are just moving into your house and you don’t plan on going anywhere any time soon, then I would suggest that the investment you are making is a calculated risk that you would want to take. However, if you are planning on only being in the house for 5-10 years and you are looking to make the house more profitable on the back end, I would stay away from putting too much money into this type of investment of the basement. At bare minimum you are going to be spending around $15,000 to do somewhat of a finished basement that is even worth the time and effort, but could that $15,000 be used for more profitable things outside of the house to make it more curb appealing? These are answer you need to answer depending on your length of anticipated stay in the house.
Author: Doug Chapman is a staff writer for HomeDaddys, a stay at home dad blog. He specializes in diapers and sippy cups, but is a successful real estate investor on the side.