Fix foundation repair/water proofing OR convert single family home into a duplex

[Matthew Villalon]

Hi there,

Im new to the real estate game and I am faced with an interesting situation. I currently own a single family home with approx $300k in equity in Long Island NY and looking to get some insight. 

A little background:

The property is a 1920s home in a flood zone on the south shore of LI and is affected by flooding and rising water table. Over the past couple of years my home has been flooding more and more due to increased rain and storms. Water is seeping through cracks in the floors and through the walls where it looks like the basement walls have signs of bowing with horizontal cracks. The basement itself is an unfinished basement, as well as unlivable (5ft high floor to ceiling). I had 1 contractor come by today and quoted me a French drain system, as well as raising the basement floor up 6 inches, with 3 sump pump's for a price tag of $16K, not including the repairs to the walls. 

Now the question:

Option 1: Should I pay for repairs to my basement out of pocket, and use the equity to fund an entirely new second investment property?

OR

Option 2: Go big and do a cash-out refi/203K/HELOC to not only repair the foundation and waterproofing, but to add an extension to the home that would support a legal duplex for some income producing property. The house sits on approx 6000sqft of corner lot property and the home is 1160sqft. I would also consider the possibility of raising the property as well to prevent further flood damage.

Im really hopeful to get some guidance on these ideas from all of you.

Thanks!