How much should I renovate while house hacking?

Question

My wife and I purchased our first home and we are planning on house hacking it is a 5 bed room 2 bath we plan on renting out the top 3 bed rooms and live in the basement the upstairs is rent ready but my wife and I are planning on renovating the basement while we live there and the most I have done in my life is paint a wall. I hear all the time don’t over renovate because you won’t get your money back out. But I want to take this opportunity to learn. Am I waisting money or is the knowledge worth it?

Jerryll Noorden · Answer

This ruggedly goodlooking dude is correct.

Sure learn all you want, but prejustifying a failure by writing it off as a learning experience is just not a very wise thing to do.

Yes look at the comparables, and now you know the upper limit of the reno finishes.

Then don't just reno it to that level. You are renting out the rooms so of course make it nice but seriously... carpet will do. No need to put hardwood floors in there just because the comparables say you should. Remember you are not (yet) selling the house you are just renting the rooms out. When it is time to sell THEN you take the upper limits of the comps more seriously.

That is what I would do.

Focus on profits more than just experience.

Brian Briscoe · Answer

@Lorenzo Dudley

Experience helps... but you want to avoid painful experience.

Before renovating, I'd suggest you look at the market comparables. If everything in your area has laminate countertops, linoleum floors, and white appliances, then granite, hardwood, and stainless steel would be over-renovating. Every market is different, but usually, making it nicer-than-average-but-not-too-nice is where you want to aim.

Look at sales and rental prices of homes in the area and focus on the ones that have renovations similar to what you're planning.  That should give you an idea of what the potential upside will be after you renovate.  If you're planning on selling the property soon, it'll be easy to get a realtor to advise you on what renovations attract buyers and which renovations bring higher sale prices.  Once you have a good idea of what features bring in higher rents and higher offers, then you can start pricing those particular renovations and determine whether the investment is worth the cost.

Lorenzo Dudley · Answer

@David M.

Thank you for your feedback to give more context we are in a college town most people in our area are single students or newly married couples. The basement is definitely live able. Most of the work we want to do is paint, flooring, tiles, and ceiling so nothing to expensive. We are thinking 20K make over the three years we live there. Looking at rents in the area if we rented the basement besides living there right now we could get 800 or 900 I believe once we do the renovations it will bring the rent up to 1,000-1,100 max because newly married couples in school are looking for the cheapest but “cute” place. So it will not bring me a ton of value but I plan on doing all the work with my father or father in law so I will learn a lot.

David M. · Answer

@Lorenzo Dudley

Well, with no details it’s prettt hard to give any advice.  What does your local market look like?  For sales and for rentals?  What is the condition of your property?  Really crappy? So-so?  Is it updated?  Outdated?  In between?

You have to do what makes sense for your neighborhood/market.  That’s what the advice is all about.  If you are in a $1M neighborhood and every other kitchen has granite counters, updated kitchen and stainless appliances, yeah you might have a tough time if you use cheap, plain white appliances and laminate with kitchen cabinets back from the 80’s...

How much should I renovate while house hacking?

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