Why remodel your basement?

Your basement is truly the most versatile space in your home, so it should be used for more than just storage or laundry. Your basement can be a man cave, game room, reading room, or whatever else you want! Remodeling your basement means you will get the most out of your space.

How much does a basement remodel cost?

The average price for a basement remodel is $20,260 with a typical range between $11,000 to $29,600. Remodeling a space by adding a bathroom or a wet bar will set you back closer to $70,000. Obviously, the bigger the space, the more it will cost.

Average Price Per Square Foot

A basement remodel can typically run $30 to $75 per square foot, with the highest end being close to $150 per square foot.

Converting Your Basement to an Apartment

Converting your basement into an apartment is one of the most costly options for remodeling a basement. This will typically cost $50,000 to $100,000. In large cities and other high income areas this could cost upwards of $150,000. The price is higher than a typical basement remodel because you have to account for a new living and sleeping space, and a bathroom. However, while these prices might seem daunting, you can expect to recoup your investment in full within 2 to 5 years.

If you are considering converting your basement into a stand-alone apartment, you should think about adding a separate walk-out door.

New Room Addition

Addition	Average Price
Home Theatre	$300/sqft
Home Gym	$500 – $25,000
Fireplace	$1,000 – $4,000
Sauna	$3,000 – $6,000
Bedroom	$3,500 – $10,500
Bathroom	$6,000 – $15,000
Wet Bar	$6,000 – $22,500

An addition to your basement is not necessary for a remodel but it is often the most convenient time to do so if you really want to transform the space. Most of the time a basement will be large enough to host more than one of these additions.

Subcontractors

Depending on which additions you are planning on adding to your basement, you will probably need to hire subcontractors. Subcontractor costs will vary depending on location and size of the project.

Subcontractor	Average Price Range
Permits & Inspections	$100 – $2,000
Plumbing	$400 – $1,800
Insulation	$500 – $1,500
Wiring & Electrical	$500 – $2,500
Drywall	$1,000 – $2,500
Ceiling	$1,000 – $2,500
Painting & Wallpaper	$1,000 – $3,000
Flooring	$1,500 – $4,000
Framing	$1,500 – $6,000
Waterproofing	$2,000 – $7,000
Interior Designer	$2,000 – $12,500

If you hire a contractor, who covers multiple aspects of a project then some of these subcontractors will not be necessary. For example, permitting is often covered by contractors. Waterproofing may also be included by your contractor but still at an extra cost.

An electrician is probably the most important subcontractor you will need. If you are planning on making any additions to your basement, you will probably need to rewire the room. Also if you are adding any specialties like a home theatre or sauna, it is important you get the wiring right.

Renovations

If there is any damage to the basement, you might also need to pay for renovations. For example, if the basement had previously flooded, you will need to strip the walls and floors to remove mold. Renovating water damage will cost an average of $3,000 to $10,000. If the room is old and unused, it might just need a bit of touching up before taking on a remodeling project.

Top Reasons for a Basement Remodel

Upgrade For Space

Creating a sleeping, living, or working space would be a major upgrade for your home. Utilizing your basement for something other than just storage is a great option for larger families, people who like to entertain or even someone who just wants their own space away from it all. Basements typically have plenty of space so if you still need storage, you can keep it and still add an upgrade. Whatever upgrade you’re looking to make, your basement has the room for it. Your basement should overall improve the livability of your home.

Increase Home Resale Value

Creating a living/multi-purpose space in your basement is a definite way to increase the resale value of your home. If the basement already has a designated purpose, prospective buyers will not have to imagine what they might do with a dingy basement.

Fulfillment

According to a 2019 Remodeling Impact Survey conducted by the National Association of Realtors (NAR), homeowners gave a basement remodel project a Joy Score of 10. This means that homeowners who took on this project were completely satisfied.

Other Factors to Consider:

Materials

In order to improve the cohesion of your home, you’ll want to use the same materials both upstairs and downstairs. For example, if you are adding a wet bar, try to use the same materials you have in your upstairs kitchen. If you have hardwood flooring upstairs, try to put the same flooring, or a look-alike, downstairs.

The cost of materials varies greatly by addition. There are so many different things you can do with your basement. If you are adding a home theatre, then you might want to invest in comfortable furniture. If you are adding a home gym, then you’ll probably be interested in very sturdy floors. Whatever you decide to turn your basement into, make sure you consult with your contractor or designer to make sure you are getting the most out of your investment.

Style

If you are remodeling your basement with the idea of putting your home on the market, then the style of the room is very important. You might want to consult with a designer, in order to make sure your new basement will appeal to current trends and a wide range of people.

Functionality

Overall, your new basement should improve the functionality of your home. Having multiple options for shared space in the home can be good for families. As much as you love spending time together, you can’t expect to be together all the time. Having another living area in the basement could benefit your family.

Turning the basement space into something productive will definitely aid any space issues you have upstairs. Even turning the basement into something fun like a home theatre or game room will improve the overall livability of your home. In fact, 38% of homeowners who took on a basement remodel reported better functionality and livability.

Would a basement remodel increase the value of your home?

Average ROI for a Basement Remodel

The average ROI for a basement remodel is 67%. Therefore, if you spend $20,260 on your new basement, you will recoup $13,574 at resale. Turning your basement into a living space will generate the largest ROI, as it is a very versatile space. Niche additions, such as a sauna, will recoup less but might be worth it to your family if you plan on remaining in your home for a long time.

Options for Financing Your Basement Remodel

1. Personal Loan

A personal loan can be a good option when you are not liquid enough to pay for a project in cash or do not yet have enough equity in your home to leverage for a complete basement remodel. A personal loan is a type of installment loan. This type of loan is typically paid back in 12-84 months so it can offer a lot of flexibility. A personal loan can be a good option for someone with good credit or a good relationship with their bank or credit union. This type of loan does not require that you put anything up as collateral so you do not need to worry about a lien on your home as long as you make your payments. Interest rates for personal loans can be lower than those for credit cards or other types of loans. Interest rates for personal loans can range from 5 to 32 percent depending on credit and loan length, while credit card interest typically averages 18 percent. Generally, the better credit you have the lower the interest rate will be. One thing to keep in mind with personal loans is that the better your credit, the lower your interest rates will be.

Prepayment penalties: Some lenders don’t charge prepayment penalties, meaning you can pay off your loan early and decrease the amount you pay in interest.

2. Home Equity Loan

A home equity loan can be considered a second mortgage. A home equity loan allows you to borrow a lump sum of money using the equity you have built in your home. A typical repayment for a home equity loan is between 5 and 30 years.

You can calculate your home’s “loan to value” ratio by dividing the amount you owe by the value of your home. For example, you owe $150,000 on a home worth $300,000. That’s $150,00/$300,000 = 0.5 or 50 percent loan to value. This means that you have 50% equity in your home. After calculating your home equity, compare it to your lender’s maximum LTV ratio to see if you qualify for a home equity loan. After confirming that you may qualify for a home equity loan you can calculate how much you may borrow by multiplying the value of your home by the maximum LTV of the lender and subtracting your mortgage balance.

Pros & Cons

Home equity loans are great for people who want to fund home improvement projects because the interest you pay will be tax deductible if the money is used for renovations, according to BankRate.

Home equity loans offer competitive interest rates when compared to other options.

Pros	Cons
Low interest rates	Closing costs can be expensive
Fixed monthly payments	For those who want to pay it off fast, they have longer funding timeline than personal loans
Interest may be tax deductible	Risk of losing your home if you are unable to make payments

Home Equity Loan vs. Home Equity Line of Credit (HELOC)

Both home equity loans and HELOCs are secured against the value of your home equity. However, a home equity loan is a lump sum of money and a HELOC is a revolving line of credit, similar to a credit card.

A HELOC may be harder to secure than a personal loan or home equity loan therefore you need good credit and a high LTV ratio.

3. Credit Cards

Credit cards are always an option for financing home improvement projects. However, credit cards are likely to be the most costly option when financing your basement remodel. Moreover, the interest rates will likely be higher with credit cards, making them harder to pay off over time. Credit cards can be obtained regardless of credit issues and therefore can be the most flexible option for a broader range of credit histories.

Conclusion

Is it really worth it?

Remodeling your basement is one of the most fulfilling home improvement projects you can take on. The space can be used for family time or solo time, it can be a party hub or you can turn it into a reading nook. The options are endless when it comes to remodeling your basement. Homeowners find a basement remodel project very rewarding. Also, you will most likely recoup a majority of your investment! So yes, a basement remodel is definitely worth it.

References

https://cdn.nar.realtor/sites/default/files/documents/2019-remodeling-impact-10-03-2019.pdf
https://www.homeadvisor.com/cost/basements/remodel-a-basement/#breakdown