Finishing and legalizing a basement
Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes
Finishing and legalizing a basement
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Architect · Cary, NC · Member since 2018 · 96 posts · 63 votes
7yAs @Frank Chin pointed out having a separate basement is a common layout for many 2 family properties.
Converting the basement to a legal unit is possible, but there are many factors which will determine whether or not it is possible zoning and code wise. In NYC when you go from a 2 family to a 3 family property, you will need to comply with Multiple Dwelling Law which is an added layer of requirements for Residential buildings 3 families and above. In addition to the additional MDL building requirements, there are many existing condition factors which can make or break a conversion such as this. Just to name a few, Zoning, Basement or cellar, ceiling heights, property dimensions etc.
Your best bet would be to hire an Architect licensed in your state to prepare a feasibility report based upon your specific property. Once you have this, you will better understand what the conversion involves. Then you can reach out to contractors for ball park prices to evaluate the construction cost. Always remember to take into account the time required to design, file drawings, construct, and subsequent sign-offs for your financial calculations.
Best of Luck,
Alex Furini, RA
31 Replies
- Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes7y
Millions of people have successfully done this. It is a tried and true strategy. Any particular questions?
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes7y
@ Brant Richardson is exactly right, and in NYC, just about all duplexes have one. I bought a foreclosure duplex where the basement was converted to an illegal apartment. It was beautiful and roomy.
Unfortunately it was discovered in a surprise visit by a passing building inspector who was investigating a complaint of an illegal unit down the street. I wasn't renting the basement, using it myself. Long story short, I legalized it as my office, removing the bathtub, and calling the kitchen an entertainment bar. I spent over $6,000 legalizing it, in minor rehab (removing the bathtub, fridge, and stove), filing plans, getting permits, paying an expeditor. Initially the city demanded it be torn down to the bare walls.
Problem was it's in a 2 family zone, and the extra unit violated zoning. A neighbor down the street with the illegal unit, and had the building department shut down the unit, blocked tenants from entry. Later he combined the illegal 1br/1ba with the 2br/1ba upstairs into 3br/2ba unit was able to legalize it because the building remained a duplex. Believe he didn't lose too much rent as it rents almost the same as two separate apartments.
All in all, I owned a number of duplexes through the years that had illegal units. The biggest problem is when you have to evict tenants from the legal units, the tenant lawyer, usually "Legal Aid" will find your illegal unit, demand the eviction be halted till you evict the tenant in the illegal unit first, and normally the court will go along with that.
The funniest thing I heard was in an election campaign years ago, Mayor Koch was asked by a reporter what he plans to do about all these illegal apartments, and if he knew how many there are. The Mayor, always with a quick retort, says I know how many there are out there, and please tell me where I'm going to house over at least 100,000 renters who'll be homeless if I start kicking butt. And he's right on.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
Thank you, maybe I should check out the zoning first. I know there are a lot of illegal basement apartments being rented out in the area below these two family homes, I just know if I go to sell one day I won't be able to sell it as a 3 family home. I just don't know what route is better to take. As of now it's a fully rented two family home with a large unfinished basement. The basement has it's own separate entrance and it has electricity. It's also going to be a very expensive project to finish. I'm pretty sure I can get good rents on it but I don't want to get in trouble for having an illegal renter. I can go the route of trying to find out the zoning laws in the area and see what it would take from the city to turn it into a legal 3 family home, which later on down the road would increase the value of home substantially if I wanted to sell. Otherwise, I could talk to a few contractors and get some quotes on what it would cost to finished the basement, but I'm not sure how that works with getting permits from the city as well. It's a little overwhelming and this is my real property investment where I have the chance to add a lot of value.
Which route would you take?
- Architect · Cary, NC · Member since 2018 · 96 posts · 63 votes7y
As @Frank Chin pointed out having a separate basement is a common layout for many 2 family properties.
Converting the basement to a legal unit is possible, but there are many factors which will determine whether or not it is possible zoning and code wise. In NYC when you go from a 2 family to a 3 family property, you will need to comply with Multiple Dwelling Law which is an added layer of requirements for Residential buildings 3 families and above. In addition to the additional MDL building requirements, there are many existing condition factors which can make or break a conversion such as this. Just to name a few, Zoning, Basement or cellar, ceiling heights, property dimensions etc.
Your best bet would be to hire an Architect licensed in your state to prepare a feasibility report based upon your specific property. Once you have this, you will better understand what the conversion involves. Then you can reach out to contractors for ball park prices to evaluate the construction cost. Always remember to take into account the time required to design, file drawings, construct, and subsequent sign-offs for your financial calculations.
Best of Luck,Alex Furini, RA
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes7y
Depends on where you are. Aside from legal/zoning restrictions, things to think about:
1. Can you provide safe egress? Windows with wells big enough to get out in case of a fire?
2. Is the basement watertight and free of mold/mildew?
3. Are the ceilings high enough to allow reasonable living space? 7 feet is pretty much a minimum and that will feel like a cave.
4. Are necessary mechanicals for the house still going to be accessible if you finish the basement?
5. Can you reasonably set it up on its own utilities/heating?
6. Can you reasonably install usable plumbing?
7. Is the house free of radon?
Skyline Properties - Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Alex Furini @JD MartinThank you both for the helpful information, definitely a lot to think about and if this project could be worth it. I'm going to reach to and talk to an Architect first, I'm sure he'll be familiar with the area. I see a lot of these two family homes that come on the market with a finished basement they rent out illegally but I just wouldn't want to get in trouble later on down the road. I also found on the city's website the application for zoning determination so I might as well submit that as well and go from there.
Thanks!
- Member since 2018 · 3 posts · 1 vote7y
Hello Elizabeth,
I'm actually going through the same process. I'm in north bergen, NJ. Only a 10 min drive to Hoboken. My basement is fully finished with two bedrooms, a full bathroom, and no kitchen yet. Right now, the basement has small windows but it has 2 separate entrances. In order to legalize it, I have to remove both bedrooms and make the basement a studio unit. By converting it to a studio, the doors will count as my fire exits and eliminates the windows. You also have to make sure you don't have radon gas leaking through. The city also required me to have the water tank and heating separate from the unit. my zoning is also only 2 family zoning, but north bergen works with the people. I hope Hoboken works with you. I know you'll make a killing by legalizing that basement unit. A studio can go for 1500 and up depending on the condition and even more for access to a backyard. I'm working with a contractor who specializes in the Hoboken area. I can ask him and get back to you.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes7y
@Elizabeth L. in NYC where I am, I had no luck legalizing a 1BR in my basement. Just to add to what @ Alex Furini mentioned, these are the actual issues I encountered.
The first is zoning, requires a hearing first at the community board level. There's fierce opposition to it due to local school overcrowding, where classes run in shifts, as early as 8:00am and as late as 6:00PM. That was some 20 years ago, and they since built a new school down the street from the other one. And the zoning board will not approve it without a recommendation from the community board.
The other reason is building standards. Though my apartment had proper egresses and height, metered separately, duplexes are built to different standards than triplexes. Back then, a triplex needs fire escapes and cement surrounded furnace rooms, which duplexes do not. Beside the expense of such expensive additions, the question is will it's appearance alter the look and feel of the area. I notice recently built triplexes feature sprinklers, fire hose connections out front. So when you do a project like this, you have to bring it up to the current standards and could be cost prohibitive.
I hired an expeditor who's also an architect. You need someone who knows the local building standards and also navigate the complex zoning issues, and know who makes the rules. He had the building department rescind the order to demolish the unit. He tells me the city feels landlords illegally profits from these illegal units, and having to demolish it and built what you need from scratch is proper punishment. My expeditor knows the assistant building commissioner, explained I got the building through foreclosure auction, and the unit was never rented. So I never made money off the illegal unit. Consequently the order to demolish was rescinded and they allowed me to keep it with minor changes, as an office, not a separate apartment. Originally demolition of the unit and rebuilding as an office would run me over $30,000. But with paperwork, permits, and minor changes, it cost me $6,000, with $1,500 to the expeditor, and $1,400 to draft plans for what was already there.
Rules in Hoboken may be different, but these are the issues you'll have to navigate.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Frank Chin Wow you went through a lot, I have a feeling something like this won't be possible. The property is actually in Union City NJ, which is currently a pretty hot market, and it's mostly two family homes. They're all very old built in the 1900's. Before I found my property I saw a lot of these two family homes with a finished basement that were being rented out illegally, so I saw the potential in my unfinished basement as it already has it's own separate entrance and a really old bathroom, and kitchen hookups, but the whole place is just concrete floor and open walls so it's basically starting from scratch. My home inspector said it could cost 50k to finish if not more. So maybe it's not worth it. Even if I had it finished and rented it out I really wouldn't want to get in trouble. I did a 1031 exchange to buy this property so I need to find ways to add value to this one so I can hopefully sell in a few years and move on to a bigger one.
So after all the trouble you went through you couldn't even rent it out for extra income? I don't get how so many of these other landlords out here getting away with it.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes7y
@Elizabeth L. No, I decided to move to this duplex, and used the basement apartment as an office for a business I had. I since retired, and the basement was not actively used. Then my daughter graduated college, moved home, got a job, and moved into it rent free for greater privacy.
Yes, around here, I could get $1,200 plus for the basement as a 1BR. The 2BR unit rented out to tenants for $1,700. Upstairs, our 3BR/2BA unit would rent for $2,500 or more. The property is mortgage free at this point, so I'm doing well even with no rent for the basement unit.
All in all, it's a good investment, with or without rent from the basement unit. What's nice is, it's 95% functional as a full apartment. We took the bathtub out, was laying in the back yard for 2 years, then put I back in instead of junking it. What's lacking is a working stove and full fridge which we got rid of when the city came after us. The basement unit does have a small fridge and a microwave right now. So what we got now is almost a 1BR apartment after all the fuss. The city has an inspection report on file that there's a full inspection, and we are in complete compliance.
The icing on the cake is older duplexes run $1.3MM and newly built ones runs under $2MM. Got it for $200K at a foreclosure auction in 1993.
- Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes7y
Hi @Elizabeth L., I would do research on the conditions of other basement units in your region. @James Wise has brought up several times the risk of finishing out basement units in regions that have a lot of moisture.
They can turn into more of a headache if water leaks from the exterior walls or moisture is not probably addressed. - Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
Thanks @Kenny Dahill, in my area I think a lot of these investors rent out these illegal finished basements and then when the go to sell the home they just remove the appliances so they don't get in trouble. I don't have the skill set or knowledge about finishing a basement so I'll probably reach out to a local architect first to see what my options are. Otherwise I can at least have walls put up so it's more secure and enclosed. I definitely don't want it to cause problems down the road but if I don't find a way to add more value then it won't appreciate as much. I bought this apartment with a 1031 exchange so I would like to 1031 it again 3 - 5 years from now.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Erix Mercedes Hi Erix, did you finish your basement from the ground up? Can I ask you what your process was? Did you let a contractor come in an do the whole job himself, or did you oversee the project and hire individual contractors to do each phase separately to save money. My rental is actually in Union City so right behind Hoboken. It's basically all multifamily homes in the area so I'm sure it's pretty strict on converting it to a legal apartment. I'm just wondering if it's worth the cost now to finish it just to increase the property value or not. Are you going to rent out your basement when it's ready or will you only rent it out when it's legal? I need to meet a good contractor, so far most people I meet want to rip me off. I've started reaching out to some people on Home advisor as well. Thanks
- Member since 2018 · 3 posts · 1 vote7y
Hello Elizabeth,
I'm still in the process. I haven't started any work yet because I still have paperwork to do. I'm working with 1 general contractor. Getting different ppl can get messy. Have you tried an expeditor? If you have a survey and a signed architect drawing, you can hire an expeditor from NJ to submit the paperwork for you. I'm waiting to legalize it to rent it out. If they deny it in the process, or when it's done, I'll still make sure everything is up to code. especially when it comes to that radon gas. Everything I suggested to you is what was suggested to me by the architect and the North Bergen township.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Erix Mercedes thanks for the advice, i'm going to reach out to an architect on home advisor so I can start the process. I don't have anything done yet except and application for the city for a construction permit. Someone else told me to talk to an architect first so that's one of my first steps. I'm not familiar with Radon Gas so I need to look into that. Thanks
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Erix Mercedes Can I ask you a quick question. I'm meeting with an architect next week at the house and he's going to give me an estimate for his drawings, design, permits to the city etc so I could finish the basement. Can I ask you how much it cost to finish your basement? I know I need to talk to a contractor next but I've all different ball parks from 30k - 60K for the project. Thanks
- Member since 2018 · 3 posts · 1 vote7y
@Elizabeth Lin I was quoted 40k for the basement and some additional work that I wanted to do in the second floor. I’m assuming without that, it’ll probably be 30-35k. I’m not going for anything fancy. Just want to make sure everything is up to code.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Erix Mercedes that sounds about right, I'm really hoping I can stay under the 40k mark. Also curious, if you can't legalize the unit, was yours still a good investment? Did this help your house appreciate enough where if you had to sell you could make your money back plus more? I have to add value to my house one way or another, weather it's renovating one of the units or having a finished basement. That last thing I want is to break even so I have to bet on home price appreciation. I figured a finished basement would create more value in the end.
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Alex Furini Hi Alex, I have a few questions if you don't mind. I met with an architect who came out to see my property and he just got back to me with a proposal and he confirmed that I'm allowed to turn the basement into a legal unit. Once I sign his proposal then he'll be able to start the project. I was thrilled to learn that I can legalize the basement, at the same time this is going to be my first large project like this and will cost a lot of money, but I know it will be worth the return. Do you have any advice on anything I should be aware of or questions I should be asking before I sign the proposal to start? I've only done small rehab projects so this one makes me a little nervous. Thank you
- Architect · Cary, NC · Member since 2018 · 96 posts · 63 votes7y
As a homeowner looking to an Architect, I would want to know an overview of what additional measures I need to comply with to complete the project. Construction estimates are one thing, but depending on your specific property there may be additional work required by zoning or code in order to complete the project. I.E. Do you need to add additional entrances for egress, sprinklers, windows, ADA compliance, fireproofing between floors etc. You should understand the typical time frame for design/filing/building department review and approval.
You want to make sure you understand all the soft and hard costs associated with the project. The more you are aware of, the less surprises in the future. Your Architect should be able to help you better understand estimates of the above.
Best of Luck with your project,
Alex Furini, RA
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes7y
@Alex Furini Understood, thank you so much!
- I know this is a couple months old but I had a question in regards to this. I'm looking at adding a finished basement to the first floor to make a 3/2 total. Basement has a full bath and first floor is a 2/1. Seems like this is much easier than trying to get a whole separate unit. What all is involved? Going to the specific township and getting CO's? Again the basement is finished and doesn't need much other than new bilco doors that are leaking and some trim replaced. Thanks!
- Rental Property Investor · Union City NJ · Member since 2019 · 46 posts · 3 votes6y
@Mark F. Hi Mark, your way is probably much easier but my way also turned out to be not as bad as I thought. I'm still in the process but I found out after I hired an architect to do the plans that I was already zoned for a 3 unit home and someone used to live in the basement 20 years ago. Once the architect finalized the plans I hired a contractor who's going to start the renovations next month to finish the basement. If I wasn't already zoned for a 3 family then I would have probably gone your route and just added it to the 1st floor making a larger unit. Let me know if you want my contact information for my architect. Since your basement is finished, I think all you need to do is hire a contractor to finish the work. Not sure if you would need an architect for anything. Hope this helps. Thanks
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes6y
Originally posted by @Mark F.:
I know this is a couple months old but I had a question in regards to this. I'm looking at adding a finished basement to the first floor to make a 3/2 total. Basement has a full bath and first floor is a 2/1. Seems like this is much easier than trying to get a whole separate unit. What all is involved? Going to the specific township and getting CO's? Again the basement is finished and doesn't need much other than new bilco doors that are leaking and some trim replaced. Thanks!There's a duplex down the block from me that did exactly what you want to do. Originally, all the duplexes on the block had illegal units in the basement. For a duplex with a CO for 2, having a 3rd unit is a no no.
I had a similar basement unit, had hassles with the authorities, long story, and finally had it legalized as a office. The unit had the right height, window sizes and egress. The owner down the street had a 2BR/1ba on the 1st floor, and a 1BR/1 Ba downstairs, similar to mine, and combine it by putting in an additional stairway between the 1st and 2nd floors, whereas without it, each unit would only have entrances of it's own to the street, though the 2nd floor had a back staircase to the basement, so I don't have to go outside to my office.
Combining the two unit avoids the zoning issues.
In NYC, if I had such a basement unit in place, it was probably done illegally. Legalizing it my involve paying some fines, filing plans, but in this case, no zoning variance. Have an architect or expeditor check it out as I did as procedures are different where you are.
@Elizabeth L. Thank you for that! I looked it up and it is zoned for 3 unit as well. Would that make things easier? Forget the bilco doors and water leakage. This property has the exit going right outside and is already set up to a patio/mud room then the exit. I'm unsure on the rest of the layout off the top of my head, like ceiling height and windows etc. Once I get more info, I might message you if that's okay to pick your brain.
@Frank Chin Interesting. Yes, like you said, combining it would avoid the zoning issue but I discovered today it's zoned for 2-4 units so I'm good there. I assume the next and last thing I would need is a CO. I'm totally new so I'm just going to go down to the city office and get the info straight from the horses mouth.
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