Skip to Content

Should You Finish Your Castro Valley Rental’s Basement?

View of the Newly Finished and Unfurnished Basement with Hardwood FlooringIf your Castro Valley rental property has an unfinished basement, you may be thinking about having it finished. There are countless grounds to want to do so, from adding value to your property to expanding the available living space. But choosing whether to complete your rental’s basement necessitates thinking a bit ahead of the project’s financial aspects. It is vital to weigh any potential downsides to finishing a basement in a rental property along with the benefits. In this way, you can more confidently decide if finishing your rental’s basement is a good move for you.

Perhaps the major reason to finish your rental’s basement is the potential increase in value and the rental income it may bring. Adding more bedrooms or another bathroom to your rental property can help you attract and retain tenants more easily, especially if your property only has a single bathroom. In many areas, the jump in rental rates for houses with one bathroom to one with two is significant and may be reason enough to start making a plan to get the work done.

Finishing a basement is also a great way to increase the equity in a property, offering high returns when the time comes to sell. This is especially true if the houses in your neighborhood tend to have finished basements, which can adversely affect your sales price if yours is the only property on the market in that area that isn’t fully finished.

Before making plans to finish your rental’s basement, however, there are many other considerations you should take the time to work through. Perhaps the first one of these is figuring out what it will cost to complete the project and how it will impact your profit margin. To get started, you’ll need to evaluate the fair market rent on your current property as-is and also for the property once the improvements have been made. Observe the difference. How big of a jump in rent will you see from having the work done? How long will it take you to recoup the cost of the project?

For a project like finishing a basement to make sense, the numbers need to add up. If you’re handy, you could plan to do some or all of the work yourself, but you’ll need to make sure that you have enough time to complete the build in a relatively short time frame.

On the financial side of things, there are also property taxes to consider, as well as potential increases in insurance rates, utility costs, and so on. Be sure to do some research and fully understand how each of your income and expenses may change after completing the project. Adding finished square footage only makes sense if you can maintain healthy profit margins once the work is complete.

Finally, it’s important to consider the situation from your tenant’s point of view. Are they willing to put up with ongoing construction in the home? If you have current tenants, you’ll need to make sure that they are completely on board with the project – and get something from them in writing saying as much. They may be eager to have the extra space, and therefore willing to put up with the noise and additional traffic. If you’re planning to raise the rent once the work is done, you’ll need to communicate that with your tenants. Some tenants may balk when they realize that the extra square footage you’re adding will cost them extra each month.

On the other hand, if you plan to wait between tenants to finish your rental property’s basement, you’ll need to manage the project carefully to avoid a lengthy vacancy. Each month that your property isn’t leased is a month that you are losing potential rental income. It’s in your benefit to ensure you have everything lined up properly to get the project completed – and your newly expanded property re-rented – in as short a timeframe as possible.

Improving a rental property is a lot of work and can take precious time away from working on your investment goals. But the Castro Valley property managers at Real Property Management Masters can help. Contact us online or call at 510-398-8704 to find more information about the many services we offer rental property investors like you.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

The Neighborly Done Right Promise

The Neighborly Done Right Promise ® delivered by Real Property Management, a proud Neighborly company

When it comes to finding the right property manager for your investment property, you want to know that they stand behind their work and get the job done right – the first time. At Real Property Management we have the expertise, technology, and systems to manage your property the right way. We work hard to optimize your return on investment while preserving your asset and giving you peace of mind. Our highly trained and skilled team works hard so you can be sure your property's management will be Done Right.

Canada excluded. Services performed by independently owned and operated franchises.

See Full Details