The ROI of a Basement Remodel
Will a Basement Remodel Add Value to My Home?
Basement remodels rank among the highest of home projects that will return tangible value at the time of resale. (ROI-Return On Investment). So, will finishing or remodeling your basement add value to the home?
This is a question we are frequently asked by customers who are thinking of finishing their basements. The short answer is: Yes, yes it will.
According to the 2017 Remodeling Cost vs. Value Report (costvsvalue.com) released in February of the same year, a basement remodel is one of the top ten home improvement projects that give you a return on your investment (ROI), and it's usually a significant number.
The long answer for homeowners thinking about finishing their basement is also "Yes, it certainly will." However, it's wise to understand the many underlying factors that can affect the value of your basement remodeling project, especially if you have competing uses for your funds.
The Latest Cost/Value Data on Remodeling Projects
Every year, Remodeling Magazine issues its well-known report that looks at volumes of cost data and estimates of resale value for a wide range of remodeling projects and calculations of ROI for these projects. Here are some results from the 2017 report for a selection of home improvement projects. Basement remodels typically score very high for resale value and ROI. Resale value in this instance is based on estimates made by real estate professionals nationwide.
The ROI for 5 Popular Remodeling Projects:
- Basement Remodel: 70%
- Bathroom Remodel: 64.8%
- Major Kitchen Remodel: 65.3%
- Bathroom Addition: 53.9%
A Higher ROI Means a Higher Selling Price
Basement remodels add value to your home, which translates into a higher listing price when it comes time to sell. Prospective buyers are typically more inclined to make offers on homes with less work to do out of the gate--and a clean, dry, finished basement certainly fits that criteria.
Remodeling ROI is calculated by estimating the increase in price range you can expect to qualify for when selling your home based on the remodeling project undertaken. So, in this example, if remodeling your basement yields an ROI of 70%, you can expect to get $700 back for every $1,000 spent.
Other surveys come up with slightly different "top ten" lists but basement remodels are consistently cited as good investments. They are generally acknowledged to be easier and cheaper than additions, the other very common way to expand a home's livable square footage.
While the results reflect trends in the real estate market, they don't change dramatically from year-to-year. And of course, the exact increase in value is an estimate and will fluctuate over time, just as your home's value fluctuates.
A Higher Return Means Your Basement Remodel is Affordable
The higher the return of any remodeling project, the lower the effective cost of the project. If you recoup 70% of the costs incurred in finishing your basement, that means it will cost you just 30% of the actual project costs. Other factors may make the project even more attractive, such as financing options or the possible tax benefit of putting a home office in the basement, for example.
Don't Forget the Non-Financial Value of Your Finished Basement
Take some time to think about how much usefulness and enjoyment you and your family could get out of a finished basement.
There’s another part of the remodeling equation, the "should we or shouldn't we" decision that only you can calculate, and that's the value of the end result. How will you use your finished basement and what's the intrinsic value of that new use?
How much value do you put on these or other basement activities?
- 500 Family Movie nights
- Band practices, gaming tournaments, and slumber parties
- 15 Super Bowl parties and other neighborhood get-togethers
- Building a craft business
- A private office away from it all
- A spare room or bath for visiting relatives
- Convenient, moisture-proof storage
We make it a habit to ask our customers this question before we even begin talking about our basement finishing line of products. This is mostly a practical question, in terms of designing the kind of basement a customer wants. But it's also a good exercise when evaluating the costs and benefits of finishing your basement. What will it mean to you and everyone living under the same roof to have a usable basement? (Hopefully, it doesn’t mean fighting about a pool table vs. a treadmill!)
Factors Affecting the Cost/Value Analysis of Your Basement Remodel
While we’ve quoted one study about the financial payback of different home remodeling projects and talked about the value you’ll get from using your basement once it’s finished, keep in mind that averages are just that, averages. And any resale data is based on a host of assumptions based off of preexisting data. Here are several factors you should consider that might not show up in a national study:
- Your neighborhood: Every real estate market is local and unique. If the resale value of your soon-to-be-finished basement is more important to you than the use you’ll get out of it (for example, you’re thinking of selling soon), then consider the real estate market in your neighborhood and the age, style, and size of your home. Over-renovating your basement with custom built-ins and unique features may not give you the return you’re looking for.
- The condition of your basement and utilities: Do you think the basement makes your home unsellable? The worse the condition of your basement - rusty windows, dark corners, signs of moisture and mildew - and the more livable you make it, the more value you're adding to your home. If your basement is in poor condition with signs of water damage, we urgently recommend solving drainage problems before remodeling, to avoid further problems in the future. Most of our TBF contractors are also basement waterproofing specialists, or they can recommend a reputable nearby contractor.
- The cost and viability of an addition: It’s almost always cheaper to finish your basement than build an addition, given that the structure and utilities are already in place, removing the need for excavation and the pouring of a new foundation.
- How long you’ll use your home before selling: Many home upgrades deteriorate over time and their value diminishes. For example, a homeowner who makes trendy stylistic choices, however valid, you may find tastes have shifted when it’s time to sell. Home maintenance projects, like interior and exterior painting, need to be re-done at regular intervals. And if you've put in drywall or carpeting in the basement, there's a chance that moisture in the basement (via a leak or improper drainage) will affect future value. That, in a nutshell, is why we developed our Total Basement Finishing system which holds up well under the worst basement conditions.
- Quality of materials and workmanship: Of course, any remodeling project that is completed with shoddy materials and/or poor workmanship is unlikely to pay you back in resale value.
How to Get Even More Value Out of Your Basement Remodel
Your finished basement should be able to withstand moisture and humidity to protect our investment.
We're in the business of developing products to keep basements dry and healthy and that includes a line of distinctive basement finishing products (like our new Elite Plank flooring). Our Total Basement Finishing system is built to withstand moisture and to keep the whole basement dry via specially designed walls, ceiling tiles, flooring, and dehumidifiers. Just as some factors will lower your remodeling ROI and others will increase it.
A Total Basement Finishing basement:
- retains its clean, dry appearance over time
- stays mold and mildew-free
- comes with a transferable warranty
Back to the question, we started with, will a basement remodel boost the value of your home when it comes time to sell? Yes, basement remodels are attractive financially, especially when compared to other remodeling projects. They represent an investment in your home and offer the potential of selling your home at a higher price point. But equally important, they add wonderful opportunities for enjoyment while you’re still living in your home.
