Remodeling or finishing basement on New home for househacking

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Remodeling or finishing basement on New home for househacking

Matthew Cook
Westminster, CO · Member since 2018 · 16 posts · 7 votes

Hello All, looking for some advice and cost estimation. I'm getting ready to sell my house in Westminster CO, and move a little bit north. I'm looking to purchase a home in Erie or Broomfield CO, where my family(2 toddlers, 2 huskys) can live comfortably on the first two floors, and we would rent out rooms/suites in the basement. We are looking at homes that are 3500sqft-5500sqft. There is a variety of homes that have walk-outs(ideal for separate tenant entrance) or we would have to create an entrance in a garden level or fully submerged basement. Erie is 30 minutes to Denver, and 25 minutes to Boulder so it has pretty decent access and is much cheaper per sqft than anywhere closer to Denver or Boulder. Our budget for the house is between $500-600k, and hopefully $40-60k for the remodel/finishing cost. 

A few questions. Does anyone have experience having a separate entrance dug out and built? Is there an approximate cost for this?

We are contemplating doing a complete basement finishing for about 1300-1500sqft, Space would be open concept kitchen/dining/living room, Master(ish) bedroom & non-shared bath, 2nd & 3rd bedroom with shared bath, then maybe a closet with stackable washer/dryer. We would be doing everything as cost effective as possible with materials, but contracting out a lot of the work. Does anyone have experience with this and have a cost approximation? This would be our first move into house/hacking. 

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Chris LopezPro Member
Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
7y

@Matthew Cook I just finished remodeling my walkout basement into a mother-in-law suite.  I'm not renting it out, rather it's for my mother in law who is helping with daycare. Rather than bringing in rent, we're saving thousands in daycare costs.

Don't buy a place that needs a separate entrance dug out. That's not a simple project and can get expensive really fast. Focus on places with existing separate entrances. 

The total remodeling costs depend on a lot of factors - from the quality of finished to how much has to be moved around. I bought a house that had a crawlspace, where the basement floor was not directly on the foundation. Much cheaper and easier to run plumbing without breaking up concrete. 

Does the municipality allow you to create a second unit and rent it out?  A lot don't. Legally, it should be zoned for more than one unit.

At a price point of 500K+ and a 50K remodel budget, you may be better off staying put and using the 50K budget as a down payment on an investment property instead. Or move into a normal house, do no work, the move after a year and keep it as a rental.

Adding 3 bedrooms, 2 baths and a full kitchen will most likely be north of 50K. I didn't add that much and mine was more.

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  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    7y

    @Matthew Cook I just finished remodeling my walkout basement into a mother-in-law suite.  I'm not renting it out, rather it's for my mother in law who is helping with daycare. Rather than bringing in rent, we're saving thousands in daycare costs.

    Don't buy a place that needs a separate entrance dug out. That's not a simple project and can get expensive really fast. Focus on places with existing separate entrances. 

    The total remodeling costs depend on a lot of factors - from the quality of finished to how much has to be moved around. I bought a house that had a crawlspace, where the basement floor was not directly on the foundation. Much cheaper and easier to run plumbing without breaking up concrete. 

    Does the municipality allow you to create a second unit and rent it out?  A lot don't. Legally, it should be zoned for more than one unit.

    At a price point of 500K+ and a 50K remodel budget, you may be better off staying put and using the 50K budget as a down payment on an investment property instead. Or move into a normal house, do no work, the move after a year and keep it as a rental.

    Adding 3 bedrooms, 2 baths and a full kitchen will most likely be north of 50K. I didn't add that much and mine was more.

    Podcast Guest on Show How to Use Equity in Your Home to Reach Financial Freedom Faster
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  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    7y

    Your issue is going to be the plumbing. It will be expensive unless the majority is in place. You say new build, so are you buying directly from the builder? I've found their costs are just about inline with what I could do one for if hiring out. The best part is that it's done when you close, AND you can roll it into the loan. Don't tell them FULL kitchen, so call it a bar. 

    I'd budget $15-20k just for the kitchen. $5k or more for electrical, and assuming plumbing is in place, $3k. Then you have flooring at $5sqft +/- depending on what you want. $10k+ for framing and the same for drywall. Another $10k for labor, misc, hanging doors, trim, etc. Then you can do the paint I'm guessing.

    I would not dig out an entrance unless it was a garden level on a walk out.  Cutting a hole that big in a foundation is beyond my comfort level even if it's properly engineered.

    On another note, are you looking at homes in Weld County? You might want to brush up on setbacks for the oil rigs. My wife and I are looking up there, and I won't move to Weld for that reason. I don't want them drilling in my backyard. NIMBY!! ;) Boulder County, more $$$, should be safe from that, at least for the foreseable future. 

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Chris Lopez is correct--don't buy a house WITHOUT a walk-out basement, if you intend to renovate/rent the space.

    Step one:  check (and confirm) with building/permits/zoning office to see if you will be able to get a c/o for the unit and legally rent it.  If not, don't do it.  

    Among other things,  you should provide 2 means of egress, either another exit door or window exit to code.  

    Critically important:  once completed, notify your insurance carrier that you own a 2-unit home.  Your premium will increase, of course.  Remember, carriers will not hesitate to cut you down when it comes to denying claims for a loss, if for them, there is an illegal or unregistered apartment.

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  • Matthew Cook
    OP
    Westminster, CO · Member since 2018 · 16 posts · 7 votes
    7y

    @Chris Lopez Yeah Chris, I've got a 1.5 and 5.5 year old. Child care is an absolute killer! Hear you loud and clear on the separate entrance. The last thing we want is to have some crazy spiraling costs with just the entrance problem. So far, I've only been able to find the HOA documents for vista ridge in Erie, and they do allow for rentals. A few stipulations, but nothing difficult. We just re did our kitchen in the house we are selling and were able to get new quartz countertops, backsplash, and sink/faucet for under $3k(including install) I think with whatever kitchen or kitchenette we decided to use, we could do it pretty financially savoy. We want to make sure it is nice enough though, that it would be competitive to the local apartments, since we want to charge $800-1000 per tenant.

    @Matt M. We are not looking at new build. The HOAs are much more restrictive in new build neighborhoods. I like homes build in the early 2000s much more. We are considering Weld county. I'm familiar with the oil drilling. Each house and neighborhood is a different consideration, but still very feasible compared to where we currently are in Westminster and Arvada. The other areas in Denver that compare to Erie house sizes/lot sizes, at the price point is Aurora, and Parker. We really don't like east Denver compared to northwest Denver.

     @Marc Winter Thank you for the tips on the window exit. Some of these basement rooms don't have that egress window, even though the staging has a bed in it. Also, thank you for the tip on the Insurance.

    We are also seriously considering getting a investment property that we can live-in flip. Every once in a while we see these pop up in Westminster. We just saw one at a great price-point(mid $400). If we went this route, then we could flip and invest in another property simultaneously. I've had my eye on Cincinnati and Columbus for quite a while, and the equity we get from this first house sale will give us a lot more options.  

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  • Matthew Cook
    OP
    Westminster, CO · Member since 2018 · 16 posts · 7 votes
    7y
    @Matt M. @Chris Lopez What do you guys think about Thornton for house hacking? Close to light rail which is good for renters. You can get more house out there and the options are more plentiful with walkouts and already finished basements?
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  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    7y

    One of my first hh clients was in Thornton or technically Northglenn, but near 112th and Colorado. He didn't have any issues renting it. Could you get into something turnkey that is almost ready to rent? That's what I'd look for. The more costs rolled into the loan the better since money is still cheap.

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  • Matthew Cook
    OP
    Westminster, CO · Member since 2018 · 16 posts · 7 votes
    7y
    @Matt M. You know, that’s more my thinking as well, something turn key. I’ve found some with walkouts, finished basements, and even some with mother-in-law kitchens ready to go for my budget. That would allow me to allocate all my profits of equity into other investments instead of further remodeling costs. So no issues with Thornton? I’m looking out around between 120th and 144th area.
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  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    7y

    @Matthew Cook In Oct I had a client by a house hack with a ready to go mother-in-law suite in a ranch home near 104th. He had the upstairs rented out immediately. He's about living for free. Also in Oct another client buy a 4 bedroom house around 135th st as a rental. It's rented out as well.  I wouldn't hesitate to buy a place up there. 

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