Finishing Basement - Considerations - Addtl unit or Duplex?

[Ian Kibbe]

Hello all, 

Longtime reader, first-time poster.

We have a classic Chicago 2-flat in Bucktown. We live on the first floor and rent the 2nd. 

• Both units are 2bd, 1bath, ~1100 sq. ft. 
• R4 zoning
• Basement is about ~1050 sq. ft.

Anyway, we're considering finishing the basement into a nice, but modest 2bd, 1 bath. There is also already an interior entry into the basement from the 1st floor. 

The immediate goal in finishing the basement is to make more space for our family of four. The youngest is 1, and we see a need for more space ASAP.  We like living in this neighborhood and plan on staying for at least another 5 years. 

The secondary goal is to increase rental income down the road. Based on our preliminary plans we should be able to relatively easily convert the basement into a 3rd unit or just rent the 1st floor as a duplex down 4bd. The construction differences to convert it into a separate unit (vs leaving it as a duplex down) would be beefing up a planned kitchenette and also building a wall to separate the basement, while giving it and the 1st floor access to shared laundry room.

To do this, we need to cash out refinance, (something we have to do soon anyway as we are on a 5 year balloon). This would raise our mortgage by ~ $700/month, which is a lot, but still makes our total mortgage payment well below rental on a 4bd, 2 bath.

So, my question for the great minds of BP is, is this a good idea? Anything I'm missing or should be considering?Thoughts on the duplex or separate unit idea?

"Go for it?" or "It's a terrible idea because the economy is going to come crashing down any minute!" And any opinions in-between. 

Very many thanks in advance. 

[Brie Schmidt]

Originally posted by @Ian Kibbe:

@Jeff Burdick - Ceiling height is  7' 6" -ish for most of it. We're probably going to dig down a few inches to get the slab level, put in floor heating, and buy ourselves a little more head room. 

@Aaron Frances - Wow, congrats!  I think that's about the scope of work we're looking at, minus the zoning changes. We have a great GC whom we're meeting with soon, so really appreciate that perspective, as I'd been considering doing it myself. I handled our rental unit renovations, but they weren't huge and this seems an order of magnitude greater.  Glad to hear you're near the other side!  

 Estimate $30k to dig if you do not need to underpin the footings.  $50k if you need to underpin the footings.  You will never get that back in terms of additional cash flow