That Basement Money

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 source. 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.

Purchasing 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.

Home Number 1:

$500,000 home price

1700 square feet

3 Bedroom/2 Bathroom Rancher

Rent estimate according to Craigslist and
$2000/per month

Estimated Gross Income: $24,000

Estimated Cap Rate: 3.9%

Home Number 2:

$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
Upper floor: 
$1772/per month

Basement: $1305/per month

Total: $3077/per month

Estimated Gross Income: $36,924

Estimated Cap Rate: 6.7%

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