There is Money Hidden in the Basement…..
When previous generations bought homes, basements were mostly used for storage or having parties (or sometimes both). It’s always worth a look, but it’s most likely there is no actual money hidden in the basement walls. But there are other opportunities down there.
Today, basements can be a beautiful long term money maker. Whether you live in the home and rent out the basement to help cover your mortgage or you rent them out as two separate units, they both make sense and dollars.
Homes with unfinished basements can provide a dual opportunity. Firstly, you can force appreciation by adding square footage to your investment by renovating the basement and converting it into a suite. Secondly, you can capitalize on rental income after the initial renovation cost.
Let's run the numbers on a home on Vancouver Island. For argument's sake, this comparison is already finished and move-in ready.
$500,000 home price
1700 square feet
3 Bedroom/2 Bathroom Rancher
Rent estimate according to Craigslist and Rentometer.com: $2000/per month
Estimated Gross Income: $24,000
Estimated Cap Rate: 3.9%
$550,000 home price
2500 square feet
3 Bedroom/1.5 Bathroom up top
2 Bedroom/1 Bathroom down
Rent estimate according to Craigslist and Rentometer.com:
Upper floor: $1772/per month
Basement: $1305/per month
Total: $3077/per month
Estimated Gross Income: $36,924
Estimated Cap Rate: 6.7%