Basement Conversions - an investment strategy

Basement conversions can be a way to quickly make a home more valuable. Just be sure to do the math before you try this. You should also plan a few surprises. 

Why should you convert basements into living space? Because unfinished basements may be the most undervalued space out there. Finish it and you can quickly and efficiently to increase the value of a home. You can even create an investment strategy of buying homes with large unfinished basements in order to resell them at a profit. 

Basements are not prevalent in all parts of the country. They also take many forms, such as "Michigan Basement", which is essentially a hole in the dirt, the house sits on. Cellars you want for this strategy is known as "full" basements, which means that they have the same square footage as the floor above them. 

You will also basements that are completely dry. Look for damp corners or water stains from previous percolation. Unless you know for sure that you can solve any moisture problems - and at a reasonable price - do not buy the house. You also want to check to see if the cellar really sell cheap in your area. Basements, like everything else in real estate can be valued differently in different parts of the country. 

A Basement Conversion Example

Suppose you find a neighborhood where the 1500 square meters, has three-bedroom homes sold for about $ 135,000, and 1,000 square feet, two-bedroom homes without basements sells for about $ 90,000. You can also see that two-bedroom homes with full basement sell for around $ 100,000 - only $ 10,000 dollars more for that extra 1,000 square feet of unfinished space. 

You speak with a contractor. If it is done simply he can panel the walls, put in two walls of a bedroom on one side, install ceiling tiles, electrical outlets, carpet and two special windows - all for $ 16,000. He can do it in about two weeks. The windows make the space legally habitable by allowing an exit in case of fire. 

Other alternatives include a sliding glass door and patio, where the ground dips low on one side. You can come with two bedrooms as well. Plug one end of a basement, two bedrooms require only two new walls. Painting the basement wall panels without them it is also possible if the cement blocks have a decent facade. Light colors will light up the room. 

You wait for the right opportunity, a two-bedroom home but because it was a rental is dirty. You make an offer of $ 86,000 and eventually cause it to $ 89,000. You decide on a family in the cellar, with a slider opening to a patio and a small bedroom as well. It costs you $ 22,000. With closing costs and a monthly holding costs, now you have $ 114,000 in property. 

You also have a three bedroom home with 2,000 square feet of finished space - more space than most recordings of the three-bedrooms in the neighborhood. It takes two months to sell, but you get $ 139,000 for it. Holding costs added another $ 1,750 in expenses, 5% commission cost you $ 6,950, and other closing systems cost was about $ 1300th This means that you had a total of $ 124,000 in the project, giving you a profit of $ 15,000. 

This isn't a big profits, but on the other hand, you pay people to do all the work. If you think that this approach can be replicated, you can have multiple projects going at once. 

Another option? You can also search for homes with basements to convert to get more rent from a property. There are families that need four bedrooms and a two-bedroom home can be made to accommodate them. You may not be able to obtain liquidity through the purchase and lease an existing four-bedroom home, but this way you could have a positive cash flow.