To refurbish basement or not in Somerville, MA (outside Boston)
Investor · Somerville, MA · Member since 2017 · 8 posts · 1 vote
A fellow submarine officer and I luckily got stationed in Boston together at the same time. We bought a 2-family in Somerville equidistant from both Davis and Porter squares. We are both independently remodeling our separate units (I own lower, he owns upper). Before we condoize the property, we are deciding if we should completely redo the basement and turn it into its own separate 2 bed 1 bath apartment. Estimates from contractors range from 150k-200k for everything. Scope is digging out basement, tuck point, permits, architect, engineer, chimney removal, re configuring HVAC, and everything else. We think we could rent the basement unit somewhere between 1800-2000 a month.
My questions are:
1. Do these numbers make sense?
2. Has anyone in the area seen this and know if it is a worthy investment
3. If so, any tips or advice (especially when it comes to permitting in Somerville) or any other contractors recommended for the job.
Appreciated all the help from BP!!!
Hey Joseph, did the contractor give you a cost break down, or just a rough number? If you get a break down it's easier to start shopping around and checking numbers otherwise you never know if he's just trying to get you to start the work and then raise estimates as the project progresses. Also I see you said you want to use an architect and engineer. If that is the case start with them and then use a contractor. Architects are legally and professionally bound to act as your agent and their liability is attached to their license number so they can't hide behind or dissolve a LLC like a contractor can. The drawings they produce can be bid out to multiple different contractors for the best price and then they will proceed to ensure their performance throughout the project. Whereas contractors will try and get people to get an architect just for permits and then tell them to trust them to do the project. They then cut corners, perform slowly and upcharge because you have no one in your court looking out for you. Bottom line, if you are new to the game, let the architect help you, they don't profit from giving you a cheap building, the contractor does.
@Joseph Lucido Not sure about your market but I have questioned finishing a basement and I've completed 4 in the last 5 years so here's what I know. In the future I will avoid ever finishing a basement in a flip or rental. Unless the money makes sense.
I dug out a 500sf basement last year 2' down then put down French drain, vapor barrier, gravel concrete. My cost was 17k we did a bench footing(google if you don't know)...if we had done an underpin it would have cost much more. We removed 60 yards of debris. that included no finish work, no plumbing electrical or HVAC. I put 3 HVAC units in the gas ones for about 6500 a piece.
I finished another basement in an area that is $700sf for finished space.....finishing this basement made sense. I spent 40k to finish the 280sf basement. That 40K is worth $94,500 when I sell the property.
Below is my local rule of thumb I would ask an agent if they have something similar in your area.
Basement SF is valued at about 50% of the above grade livable space, if they are both finished to the same level.
hard to tell from the pics but there's a concrete bench all the way around the room . That allowed us to go down below the footing.
@John Hickey Thanks for all the information. I will def take it into consideration. I believe the extra sq ft is worth the money here in Boston.
Hey Joseph, did the contractor give you a cost break down, or just a rough number? If you get a break down it's easier to start shopping around and checking numbers otherwise you never know if he's just trying to get you to start the work and then raise estimates as the project progresses. Also I see you said you want to use an architect and engineer. If that is the case start with them and then use a contractor. Architects are legally and professionally bound to act as your agent and their liability is attached to their license number so they can't hide behind or dissolve a LLC like a contractor can. The drawings they produce can be bid out to multiple different contractors for the best price and then they will proceed to ensure their performance throughout the project. Whereas contractors will try and get people to get an architect just for permits and then tell them to trust them to do the project. They then cut corners, perform slowly and upcharge because you have no one in your court looking out for you. Bottom line, if you are new to the game, let the architect help you, they don't profit from giving you a cheap building, the contractor does.
@Kevin K is spot on about why you should get an Architect. An Architect cannot have an LLC because we provide professional services to the public. We have to at least form a PLLC. When you hire an architect be sure that you have them under contract for construction administration. This is where the Architect acts on your behalf. They never perform an inspection but an observation. We can't tell the contractor what to do. We will observe it and inform you what is going on. Then you can make the decision. For example, an Architect might call out a type of waterproofing member but the Contractor buys a cheaper product. The Architect informs you of this and then you decide if you want to make the Contractor redo their work or accept as is.
I also found out that it is hard to get a cost breakdown from Contractor because they all profit on different aspects of the job differently. My experience is that they will charge more as a per item basis than on a job containing multiple items. Do try but be aware that this might happen. When you run your numbers don't forget to add at least 10% in contingencies to the contract price. Basement are hard to due but if it makes sense in your market go for it.
As far as permits go be sure to call the zoning/planing/building department and find out what they need. You might get an Architect or contractor to do it but at least you will have an idea of what needs to get done. For example, a family friend hired a contractor and they got their plans approved. They were 4 weeks into construction with their underground rough plumbing completed and the city gave them a stop notice. The contractor and the city forget to send out letters notifying the neighbors that my family friend had a applied to build a guest house. The lot was zoned for this but there was a requirement during the zoning process to notify neighbors for any objection to the project. The project had to go back to the various commission and boards and lawyers were brought in. After a year of fighting my family friend gave up. This all happened because a letter was not sent out at the beginning of the process. This is what you pay and obtain an Architect. However, some of them might not know either which is why I suggest you call and ask as many questions as possible. The municipalities are always kind to newbies.
Good Luck!
Sir, thank you for your service. Money is money, you can invest same amount in your duplex, stocks or Rochester Minnesota. Look for velocity. Say somebody came to you, and sad they have 200k to invest and looking to get 1800 a month back. Does it sound like a sound deal to you? Doesn't to me. Take taxes, utilities, what not out - your 1800 is 1500. Now look at Kansas or Milwaukee, Minneapolis or Tallahassee. How far will your 200k go, and what kind of return can you generate? Good luck.
@Eric Teran and @Account Closed I understand that logic, but we are also looking to gain a 100k in equity by redoing the basement as well. We figured even a 15 year loan for the work at a rate of 4.5% we are still breaking even and then straight cash-flowing after. Also, we are going to have to sink money into our basement for foundation, tuck pointing etc anyways. So we see it as why not redo it all and add living space to the basement while we are at it to get an additional unit out of it plus the rent that goes with it.
@Joseph Lucido, it sounds like you've been diligent in all your research. In case you haven't already done so, make sure you ask the zoning officer 1) if this 3rd rental unit is allowed in your zone (not as an "accessory apartment" but as a full-blown rental unit based on the zone the property is located in, and 2) if you'll be able to sell it as a condo down the road. Every town/city in the Boston area has different zoning by-laws and there may be some hard-to-find clause somewhere in the ordinance that could spoil all your big plans, (for example, parking requirements).
And as far as the role of an architect, @Eric Teran and @Account Closed make some valid points. I would also add that the architect has no control over the construction budget, unless he has experience in construction and you have hired him for pricing and Construction Management as well (not to be confused with Construction Administration). My point is that hiring an architect does not relieve you from major potential risk when it comes to going way over the construction budget. You will need to do a lot of research on the contactor(s) and talk to their past clients and ask them about their experiences with regard to cost overruns, surprise extras, scheduling, etc. You should be able to get a "fixed price" with some clauses for unknowns that no one can see until you starting digging or tearing open walls. I'd also be very careful about getting the lowest bid - again, just make sure you do your due diligence on them.
Lastly, your $200K may very well make a better return somewhere else, but this is your property and you will do what you're most passionate about, and do something you can take pride in, even if it's a little less lucrative. Best of luck with the project!
@Vahe Ohannessian there is one thing that I would disagree with. The Architect does play a major role in the construction budget. The Contractor only give you a price depending on what the plans tell him to build. If the Architect designs one type of footing as opposed to a less expensive one then it is the Architect's fault. Sometimes there is nothing the Architect can do due to structural concerns. However, a lot of the time a good Architect will work with an engineer, or interior designer or cabinet maker, etc. to find the most economical solution. Also, an Architect should have a relative idea how much it cost to build so that they do not lead the client down the wrong path. If a client says they have $100k to build but want something more in the line of $200k an Architect should know this and warn the client. The Architect will not be able to give you an exact price but he should be able to design within your budget.
If you hire an Architect to do Construction Administration they will also approve payments to the contractor. If the contractor begins to ask for too much money or for money with items not completed he can tell the owner and refuse or partially accept the application for payment from the contractor. In this way the Architect helps the Owner control cost.