Adding A Basement Apartment to a Dallas BRRR

[Kunaal Kumar]

I found an interesting property that needs some cosmetic upgrades. In addition, it has a large unfinished basement. How do I figure out how much value I could add to the ARV by finishing out the basement?

I've seen online that a quick rule of thumb is to value the basement square footage by 50% of the above ground square footage. Is this still true in Texas, since basements are relatively uncommon? A house down the street with similar above ground square footage (and no basement) sold for around the price that I would be all in at, so I think that in the absolute worst case where the basement adds 0 value, I can at least break even.

Also, since the main floor plus the basement is a lot of square footage, it seems inefficient to me to rent out the whole thing. Instead, I was  thinking of adding a separate entrance to the basement and adding egress windows so I could add bedrooms down there and rent it out as a basement apartment.

Renting them out separately would allow me to roughly break even on cash flow, which is fine with me since my main objective is to build equity. 

Is this plan feasible? Is there a better way to value the ARV with the basement? Any insight would be greatly appreciated!

[Rob Lee]

Basements in Dallas are very rare. Almost non-existent. I would have an engineer confirm that it is structurally sound.