The ROI of a Basement Remodel

Will a Basement Remodel Add Value to My Home? 

Before committing your home improvement dollars to a project, make sure you'll get maximum value out of the project. Basement remodels rank high for projects that return tangible value (ROI).

This is a question we get asked by customers who are thinking of finishing their basement. The short answer is: Yes. According to the 2017 Remodeling Cost vs. Value Report (costvsvalue.com) released in February, a basement remodel is one of the top ten home improvement projects that give you a return on your investment (ROI).

The long answer for homeowners thinking about finishing their basement is also "Yes". But it's wise to understand the many underlying factors that affect the value of your basement remodeling project, especially if you have competing uses for your funds.

The Latest Cost/Value Data on Remodeling Projects

Every year, Remodeling Magazine issues its well-known report that looks at volumes of cost data and estimates of resale value for a wide range of remodeling projects and calculates an ROI. Here are some results from the 2017 report for a selection of home improvement projects.

The ROI for 5 Popular Remodeling Projects:

• Basement Remodel: 70%
• Bathroom Remodel: 64.8%
• Major Kitchen Remodel: 65.3%
• Bathroom Addition: 53.9%

Basement remodels typically score high for resale value and ROI. Resale value in this instance is based on estimates made by real estate professionals nationwide.

A Higher ROI Means a Higher Selling Price

Basement remodels add value to your home, which translates into a higher price when it comest time to sell..

Remodeling ROI is calculated by estimating the increase in price you can expect to get when selling your home based on the remodeling project undertaken. So, in this example, if remodeling your basement yields an ROI of 70%, you'd get $700 back for every $1,000 spent.

Other surveys come up with slightly different "top ten" lists but basement remodels are consistently cited as good investments. They are generally acknowledged to be easier and cheaper than an addition, the other way to expand a home's livable square footage.

While the results reflect trends in the real estate market, they don't change dramatically from year-to-year. And of course, the exact increase in value is an estimate and will fluctuate over time, just as your home's value fluctuates.

A Higher Return Means Your Basement Remodel is Affordable

The higher the return of any remodeling project, the lower the effective cost of the project. If you recoup 70% of the costs incurred in finishing your basement, that means it will cost you just 30% of the actual project costs. Other factors may make the project even more attractive, such as financing options or the possible tax benefit of putting a home office in the basement, for example.

Don't Forget the Non-Financial Value of Your Finished Basement

Give some time to think about how much usefulness and enjoyment you'll get out of a finished basement.

There’s another part of the remodeling equation, the "should we or shouldn't we" decision that only you can calculate and that's the value of the end result. How will you use your finished basement and what's the intrinsic value of that new use?

How much value do you put on these or other basement activities?

• 500 Family Movie nights
• Band practices, gaming tournaments and slumber parties
• 15 Super Bowl parties and other neighborhood gettogethers
• Building a craft business
• A private office away from it all
• A spare room or bath for visiting relatives
• Convenient, moisture-proof storage

We ask our customers this question before we even begin talking about our basement finishing line of products. This is just practical, in terms of designing the kind of basement a customer wants. But it's also a good exercise when evaluating the costs and benefit of finishing your basement. What will it mean to you and everyone living under the same roof to have a usable basement? (Hopefully it doesn’t mean fighting about a pool table vs. a treadmill!)

Factors Affecting the Cost/Value Analysis of Your Basement Remodel 

While we’ve quoted one study about the financial payback of different home remodeling projects and talked about the value you’ll get from using your basement once it’s finished, keep in mind that averages are averages. And any resale data is based on a host of assumptions. Here are several factors you should consider that might not show up in a national study:.

• Your neighborhood: Every real estate market is local and unique. If the resale value of your soon-to-be-finished basement is more important to you than the use you’ll get out of it (for example, you’re thinking of selling soon), then consider the real estate market in your neighborhood and the age, style and size of your home. Over-renovating your basement with custom built-ins and unique features may not give you the return you’re looking for.
• The condition of your basement and utilities: Do you think the basement makes your home unsellable? The worse the condition of your basement - rusty windows, dark corners, signs of moisture and mildew - and the more livable you make it, the more value you're adding to your home. If your basement is in poor condition with signs of water damage, we recommend solving drainage problems before remodeling. Most of our TBF contractors are also basement waterproofers or can recommend a reputable nearby contractor.
• The cost and viability of an addition: It’s almost always cheaper to finish your basement than build an addition, given that the structure and utilities are already in place.
• How long you’ll use your home before selling: Many home upgrades deteriorate over time and their value diminishes. For example, a homeowner who makes trendy stylistic choices, however valid, you may find tastes have shifted when it’s time to sell. Home maintenance projects, like interior and exterior painting, need to be re-done at regular intervals. And if you've put in drywall or carpeting in the basement, there's a chance that moisture in the basement (via a leak or improper drainage) will affect future value. That, in a nutshell, is why we developed our Total Basement Finishing system which holds up well under the worst basement conditions.
• Quality of materials and workmanship: Of course, any remodeling project that is completed with shoddy materials and/or poor workmanship is unlikely to pay you back in resale value.

How to Get Even More Value Out of Your Basement Remodel

Your finished basement should be able to withstand moisture and humidity to protect our investment.

We're in the business of developing products to keep basements dry and healthy and that includes a line of distinctive basement finishing products (like our new Elite Plank flooring). Our Total Basement Finishing system is built to withstand moisture and to keep the whole basement dry via specially designed walls, ceiling tiles, flooring and dehumidifiers. Just as some factors will lower your remodeling ROI and others will increase it.

A Total Basement Finishing basement:

• retains its clean, dry appearance over time
• stays mold and mildew-free 
• comes with a transferable warranty

Back to the question we started with. Yes, basement remodels are attractive financially, especially when compared to other remodeling projects. They represent an investment in your home and offer the potential of selling your home at a higher price point. But equally important, they add wonderful opportunities for enjoyment while you’re still living in your home.