Alternate uses for a basement?

Question

Hey everyone, I'm a new investor and I just purchased my first rental property recently!

I bought a duplex, and I am currently living in one unit while renting out the other.  I don't currently make enough to cover the mortgage and expenses with just the rent but I will when I move out.

My question is this.  I have a basement with a good amount of space that's not being used.  I was told I could fix it up into a studio apartment because the only way to get in the basement is from outside anyway, if doesn't attach to the other units.

Someone else told me I could turn it into a storage unit and rent it out that way too.

What other options are there for renting out an unused basement, and how much money and work would it take to repurpose the basement for that use?

Account Closed · Answer

@Blake Williams, Ed has certainly given you much to consider... that said, to elaborate on converting the basement to an apartment of sorts (re: window sizes), sleeping rooms are required to have a means of egress (i.e.,  a window or door directly to the exterior that meets certain size requirements)... not all the windows in the basement need to meet this criteria though and if the conversion is to a studio/efficiency type apartment (i.e., there is no separate sleeping room), the door you mentioned may very well meet the requirement.

Depending on the codes in your area, you may also have to incorporate some level of fire separation between the apartment and the floor above.

I encourage you to contact the building department and discuss your options with them... they may very well have some suggestions too.

Good luck!

Blake Williams · Answer

Thanks for all the advice everyone, I'll be sure to look into the zoning etc... of my area as soon as possible.

David Krulac · Answer

Hi @Ed W.

@Blake Williams

As Ed mentioned Egress windows are a big deal in basement units to meet building and fire codes.  These windows have to be large enough for somebody to exit the windows in case of a fire.  Unless the basement is exposed to the surface an egress window requires excavation and either a preformed concrete steps out of the basement or a poured concrete steps.  There would need to be an egress window in EVERY room in the basement and in many jurisdictions EVERY window in the unit would need to be egress.  Besides being large enough for a person to exit the egress windows must be large enough for a fire fighter to enter with and air tank on their back.

Zoning, codes and safety aside, I have had a basement apartment.  It was totally below grade and the temperatures there were 10-20 degrees different from the floor above.  In addition the humidity is higher usually in basement units and you have to be concerned with formation of mold.  Its darker in basement units generally, and showers can add to the humidity already there.  Many basement require that a de-humidifier be constantly run.  these appliances do use a lot of electricity, equivalent  to a window air conditioner.

And as Ed mentioned flooding is a whole another issue.  Even if you are not in a flood zone, excessive rains and surface run off can cause water to infiltrate the basement.

And from my experience basements have a stigma and are harder to rent and rent for less money.

I'm not even a fan of finished basements in SFH.  Of all the units I currently own less than 10% have finished basements, and all of those were finished before I purchased.

Ed W. · Answer

@Blake Williams There are numerous factors to consider before anyone can give you a solid opinion:

1. If the property is in an area covered by zoning or similar restrictions, it is very unlikely you could use the unit as a 3rd residence.  It's worth checking but most owners would have used it that way if it was permitted.

2. If the property is permitted to have 3 units, then you have to consider finished ceiling heights, window sizes (unsafe to have "basement" sized windows for an apartment), flooding potential, placement of the mechanicals, size and nature of the entry, whether or not there are 2 ways to exit and a number of other practical considerations and considerations dictated by the laws and codes of the area.  You will create great liability for yourself (and, likely, the tenant as well)  if you create a unit in violation of the law.  If anyone gets hurt or dies kiss your life as you know it goodbye.

3. Whether or not it could be used solely for storage by someone other than a resident would likely also be determined by law and/or code and/or zoning although I suspect that to lease one storage unit (even if one wasn't technically permitted) that wasn't accessed often - if that were to pass muster with your insurer - would likely fly under the radar of most government entities (though it would still have some risk).  If the storage tenant kept dangerous chemicals, explosives, etc. there you, of course, will have significant liability particularly if you do this in violation of law.