Unsure about ROI on finishing basement for future rental
Hello,
I purchased my first home last year, a small brick ranch in a great area (Downers Grove, IL). It is currently a two bedroom, one bath and is walking distance to three highly rated schools (elementary, middle, and high school), 3/4 mile walking distance to a nice downtown area, and has a great yard. I am on a main street with a few smaller homes but million dollar homes are popping up everywhere and I only see this area improving. I plan on staying here another year or two, then upgrading to another fixer-upper and want to use this home as a rental. A similarly sized rehabbed home a few doors down from me sold 6 months ago for about 360,000 and I have seen several posts for people looking for rental homes in my area. I am guessing I could rent at the current state for 1400-1900 but without the basement it is small and I think I would have more turnover and may be harder to rent due to the current size and wasted potential living space. I would love to find a great long-term family to rent to. If I rehabbed as described below, I am estimating I could easily rent for 1800-2600/mo with the extra bedroom and bathroom. My current mortgage is 1500/mo.
Here is my question: I have a completely unfinished basement. I want to add a bedroom and bathroom with shower to give me a 3 bedroom, 2 bath house. I have gotten contractor estimates ranging from 28-50k. I found one I really like and his estimate was 40-50k. He is the only one that I have been impressed with and felt the 28k contractor wasn't listening to what I wanted and was trying to cut corners and not give me what I am asking for without me noticing. I almost would rather pay a bit more and have peace of mind that things will be done right and not have to babysit. Worst case if rental prospects fall short, I think finishing the basement would increase my home value enough to break even, if not more. I know nothing is for sure, so what do you guys think? Is 40-50k realistic or way too much for what I envision as the future of this home? Should I even bother with this project?