Converting Finished Basement into an Asset

9 Replies

Hello Fellow BP Members,

I am a recent transplant from NC to MD. I am wondering how many of you have turned your basements into income producing rentals?

I am an experienced investor and Real Estate agent (Licensed in MD and NC) that specializes in Short Term and Corporate Rentals - Please see this BP post about my first Short Term/Corporate rental development in NC:

https://www.biggerpockets.com/forums/61/topics/385...

I see a HUGE untapped market in the North Baltimore - South Harford County areas - Why arent more people taking advantage of the space that they already have in their basements/houses? Corporate travelers NEED safe housing in our area. They typically look for a room and private bathroom at a minimum. 

This is not the same as Short Term Rentals that are being heavily regulated - Corporate travelers typically rent for 60 - 90 days at a time and pay around $800 for a room and $1200+ for a private space (such as a furnished basement with bathroom). 

As a concept, basements are a horrible idea...they are forever problematic, even when built for occupancy. Most of the logistics with running a sanitary line is a problem if adding a bathroom. Basements are not naturally habitable space...for the purpose of appraisal anyway...and even when finished, the additional appraised value will only be .30-.40 cents on the dollar...considering the huge costs to properly renovate a basement for occupancy, the ROI is quite poor. There are lots of regulations around this concept, so just be sure you're up to code if you venture down that path of renting basement space...

@Justin Tahilramani

Brandon - I see that you are from Columbus - your market may be different. Out here many people already have finished basements with bathrooms. Also - a number of them are walk out. 

I understand what you are saying - but that's a blanket statement that does not apply to every basement.

The main question does the law allow it. Montgomery County allows basement rentals on only very specific properties. PG county doesnt allow it. DC does on certain ones, Virginia is a no go. 

Short term rentals in Montgomery County and DC are limited to 120 days per year. PG county only allows 30 consecutive days, 90 days in total when homeowner is not present and 180 days in total.

Originally posted by @Russell Brazil :

The main question does the law allow it. Montgomery County allows basement rentals on only very specific properties. PG county doesnt allow it. DC does on certain ones, Virginia is a no go. 

Short term rentals in Montgomery County and DC are limited to 120 days per year. PG county only allows 30 consecutive days, 90 days in total when homeowner is not present and 180 days in total.

 I think the main distinction is Short Term Rental vs. Furnished Rental. Most areas look at this in one of two ways - short term is either less than 30 or less than 90 days. Anything over that is considered a normal tenancy. Corporate travelers almost always rent in excess of 90 days - qualifying it as a normal tenancy. 

I have one rancher that I picked up cheap and turned it into a duplex by creating a (legal and permitted) full apartment in the basement.  The reno cost more, of course, but the extra cashflow more then made up for it.

I hadn't thought about the idea of doing corporate/furnished rentals with some of my units that are near major job centers - do you find that there is significant extra cashflow to makeup for the high turnover?

Originally posted by @Joe Norman :

I have one rancher that I picked up cheap and turned it into a duplex by creating a (legal and permitted) full apartment in the basement.  The reno cost more, of course, but the extra cashflow more then made up for it.

I hadn't thought about the idea of doing corporate/furnished rentals with some of my units that are near major job centers - do you find that there is significant extra cashflow to makeup for the high turnover?

 Joe - yes, there is a significant upside to marketing to corporate travelers. You just need to know how to find them. there are many that are looking for housing around Baltimore.

Finishing a basement and renting it out with a separate entrance is like the #1 house hacking strategy in Toronto. Legally doing it is another story. For the most part it adds tons of value.