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Should You Finish Your Quincy Rental’s Basement?

View of the Newly Finished and Unfurnished Basement with Hardwood FlooringIf your Quincy rental property has an unfinished basement, you may be thinking about having it finished. There are many motivating factors to do so, from adding value to your property to expanding the available living space. But evaluating whether to complete your rental’s basement involves thinking a bit further than the project’s financial aspects. It’s helpful to examine any potential downfalls to the basement’s completion in a rental property and the possible consequences. In this manner, you will determine more clearly whether finishing your rental’s basement is the right choice for you.

Perhaps the main benefit to finish your rental’s basement is the potential increase in value and the rental income it could deliver. Constructing additional bedrooms or another bathroom to your rental property could make it easier for you to keep tenants, especially if your property only has a single bathroom. In several locations, the bounce in rental rates for houses with one bathroom to one with two is significant and probably a reason enough to start getting the work done.

Finishing a basement is also an effective way to increase the equity in a property, offering high returns when you want it to sell. This is especially true if the houses in your neighborhood tend to have finished basements, which could badly affect your sales price if yours is the only property on the market in that area that isn’t fully finished.

Before you act quickly to finish your rental’s basement, however, you need to fully comprehend a few other considerations. Probably the first one is to determine what it will cost to complete the project and how it will impact your profit margin. To get started, you will 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 discrepancy. How big of a jump in rent will you see from having the work complete? 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 available, you may choose to do any or all of the work yourself, but be sure that you have enough time to complete the build in a relatively short duration.

On the financial side of things, there are also property taxes that should not be ignored, aside from potential increases in insurance rates, utility costs, and so forth. Make sure to carry out some research and thoroughly understand how your revenues and expenses may adjust once you have met your target. Adding finished square footage only makes sense if you can retain healthy profit margins once the work is completed.

After all, it’s vital to recognize the situation from your tenant’s point of view. Are they eager to put up with ongoing construction in the home? If you have current tenants, you’ll need to make sure that they are happy with the project – and get something from them in writing saying as much. They may be eager to have the extra space and, therefore, deal with the noise and additional traffic. If you want to raise the rent once the project is complete, you will need to clarify that with your tenants. Other tenants might refuse when they recognize that the extra square footage you’re adding will cost them extra each month.

On the other side, if you mean to wait between tenants to finish your rental property’s basement, you will need to manage the project carefully to avoid an extensive vacancy. Every month passing that your property isn’t leased is a month that you are losing potential rental income. It is in your obligation to ensure that it is perfectly aligned to get the project completed – and your newly established property re-rented – in as short a period as possible.

Improving a rental property is a lot of work and can take valuable time away from working on your investment goals. But the Quincy property managers at Real Property Management Associates can help. Contact us online or call at 508-509-4485 to discover more about the many services we offer rental property investors like you.

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