Basements: To Finish, or Not to Finish?
By Brady Erickson, Realtor
In Minneapolis, finishing a basement is one of the most common and substantial projects a homeowner or potential buyer will consider taking on. Unfortunately, not every basement project is worth beginning in the first place, and many zealous but unaware proprietors find themselves in too deep after it is too late.
Contrariwise, there are a few basic filters through which an investment can ultimately be deemed wise and worthwhile. We will split some common scenarios into three categories: red light, yellow light, and green light.
Red Light (Before Selling)
Finishing your basement in close proximity to listing your home on the market is rarely worth the investment or potential headache. The National Association of Realtors estimates a 63% return on investment based on a $40,000 basement renovation. 1This isn’t to say that 63% is a rigid number with no room to close the gap, but it does give you a starting number that is much more difficult to overcome than comparable renovations, such as a bathroom or kitchen remodel.
Another consideration: In Minneapolis, many unfinished basements in ‘turn of the 20th-century homes’ may be far more expensive than the “average” renovation. Some notable deterrents might be the need to pour a new slab or remove a gravity furnace. Certainly, these can be overcome with the right expertise and resources, but little room is left over for much more impactful projects.
Yellow Light (Borderline-Useful Life)
If your home is not going to hit the market any time in the near future, finishing a basement may serve a useful purpose beyond the simple bottom line of an investment. The function or usefulness of a second living space, additional bathroom, or bedroom could far outweigh the upfront costs or legitimacy of the long-term ROI, especially if it keeps you from needing to buy a bigger home.
However, caution should be present in the decision if the basement lacks a reasonable footprint. 2Picture a scenario where one’s projected 63% ROI was worth taking a risk on for the “usefulness” of the added space while occupied by the owner. This particular person(s) may be in for a rude awakening when it is finally time to sell if a remodel is done that inhibits the sale, rather than adds any recovering value. A few common examples might be a prohibitively low ceiling, a water susceptible space, or a confusing/off-putting layout (i.e. going through a bathroom to reach a bedroom, inaccessible utility room, etc.). Potential buyers will sense the lack of potential and devalue the property more than they would for a merely empty space. Simply put: A basement is not worth finishing if it’s not finished in a way that may be ideal for a different future buyer.
Green Light (Long-Term Hold)
Some basement projects can be a slam dunk because of the relatively low cost of the work and long-term useful life. Those invested dollars can go to work very quickly if a bedroom or bathroom is added to the property. The impact of those additions is particularly felt when adding a 3rd/4th bedroom or 2nd/3rd bathroom. Adding a 5th/6th bedroom could be superfluous, and might not provide much in the way of resale value, but it could also provide a bump in rental income if that’s the angle of attack. There are countless scenarios that could be favorable, depending on the homeowner’s goals.
In Minneapolis, there are certainly basements begging to be finished. Some basic qualities that make a project more prudent are a large foundation footprint (ideally more than 800 sq./ft.), high ceilings, existing plumbing, level floors, low moisture, and an egress window conducive wall(s) to name a few. Of course, not every one of these must be in place for a wise renovation, but the more there are, the less risk of disaster.
In summary, basement finishing can be anywhere from exceedingly foolish to extraordinarily prudent. Having a firm grip on everything from the vision to the costs will save you from many headaches. Few can enter this journey alone, so if you lack confidence in evaluating a prospective basement project, talk to an expert who can help guide you through the winding road. If you have confidence, still talk to the experts; there is often victory in an abundance of counsel.
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