If your East Rockaway rental property has an unfinished basement, you may be thinking about having it finished. There are many significant aspects to do so, from adding value to your property to expanding the available living space. However, choosing whether to complete your rental’s basement involves thinking a bit beyond the project’s financial aspects. It’s helpful to measure any possible downsides to the completion of the basement in a rental property, along with the advantages. In this way, you can more confidently identify if finishing your rental’s basement is appropriate for you.
Perhaps the best reason to finish your rental’s basement is the potential increase in value and the rental income it could offer. Extending more bedrooms or one more bathroom onto your rental property will make it less difficult to reach potential tenants, mainly if your property only has a single bathroom. In many places, the jump in rental rates for properties with one bathroom to one with two is significant and possibly enough reason to begin making a plan to get the job finished.
Finishing a basement is also a great way to increase the equity in a property, generating high returns when you want it to sell. This is particularly the case if the houses in your neighborhood tend to have finished basements, which may dramatically 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 go through. Probably the number one is to analyze 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. Perceive the difference. How big of a jump in rent will you see from having the work finished? 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 that need to be considered, aside from potential increases in insurance rates, utility costs, and many more. 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 keep healthy profit margins after the work is finished.
Finally, it’s vital to determine the situation from your tenant’s point of view. Are they willing to go along with the ongoing construction in the home? If you have current tenants, you need to make sure that they agree to the project – and get something from them in writing saying as much. They may be willing to have the extra space, and therefore ready to manage the noise and additional traffic. If you plan to raise the rent once the project is done, you will need to negotiate that with your tenants. Some tenants may be doubtful when they realize that the extra square footage you’re adding would cost them extra each month.
On the other side, if you’d like to wait between tenants to finish your rental property’s basement, you will need to manage the project carefully to prevent a lengthy vacancy. Every month that your property isn’t leased is a month that you are losing potential rental income. It’s in your benefit to guarantee you have everything lined up properly to get the project completed – and your recently enlarged 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 East Rockaway property managers at Real Property Management Innovation can help. Contact us online or call at 516-570-9275 to find out more about the many services we offer rental property investors like you.
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