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Should You Finish Your The Colony Rental’s Basement?

View of the Newly Finished and Unfurnished Basement with Hardwood FlooringIf your The Colony rental property has an unfinished basement, you may be thinking about having it finished. There are various reasons to wish to do so, from adding value to your property to expanding the available living space. But determining whether to complete your rental’s basement necessitates thinking a bit further than the project’s financial aspects. It is essential to weigh any prospective drawbacks to finishing a basement in a rental property along with all the advantages. This way, you can more positively determine whether or not finishing your rental’s basement is the right move for you.

Perhaps the main reason to finish your rental’s basement is the potential increase in value and the rental income it could bring. Adding more bedrooms or another bathroom to your rental property can help you attract and keep tenants more easily, particularly if your property only has a single bathroom. In many areas, the jump in rental rates for houses with one bathroom to one with two is significant and may be reason enough to start making a plan to get the work done.

Finishing a basement is also an excellent way to increase the equity in a property, offering high returns when the time comes to sell. This is particularly true if the houses in your neighborhood tend to have finished basements, which can adversely affect your sales price if yours is the only property on the market in that area that isn’t fully finished.

Before you make the plans to finish your rental’s basement, however, there are many other factors you should take the time to work through. Perhaps the first one of these is to find out 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. Observe the difference. How big of a jump in rent will you see from having the work done? 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 in order to do some or all of the work yourself, but you’ll have 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 to consider, as well as potential increases in insurance rates, utility costs, and so on. 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 maintain healthy profit margins once the work is complete.

Ultimately, it’s important to take into account the situation from your tenant’s point of view. Are they prepared to accept ongoing construction in the home? If you have current tenants, you’ll have to make sure that they are completely on board with the project – and get something from them in writing saying as much. They may be eager to have the extra space, and therefore willing to put up with the noise and additional traffic. If you’re planning to raise the rent once the work is done, you’ll need to communicate that with your tenants. Some tenants may balk when they realize that the extra square footage you’re adding will cost them extra each month.

Then again, if you plan to wait between tenants to finish your rental property’s basement, you’ll need to manage the project carefully to avoid a prolonged vacancy. Each month that your property isn’t leased is a month that you are losing potential rental income. It’s in your benefit to ensure you have everything lined up properly to get the project completed – and your newly 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 Colony property managers at Real Property Management Pioneer can help. Contact us online or call at 940-435-2526 to find out more about the many services we offer rental property investors like you.

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