Renting Out My Basement

[Marc Yu]

I've got 3 other rental properties (all of them cash flowing positively), but the 4th property I just bought, the one I'm living in, has a 1,300 sf partially finished basement (all framing is up and electrical is already installed). I can finish it for about $35k (HVAC, plumbing, drywall, ceiling, flooring, appliances, finishes, etc.), and I can probably rent it out for about $1,800 in my area. I'm taking a HELOC against one of my existing properties, which I currently own free and clear, to finish the basement. Hoping in 2 months the basement will be rented out. This will cost me about $400 a month on a 20 year loan (taxes and insurance included in monthly HELOC payment).

So, is this a good idea?  My wife thinks it's a horrible idea since that will put us in further debt, but it's cash flowing.

[JD Martin]

Originally posted by @Marc Yu:

Originally posted by @Brandon Battle:

If the wife is not comfortable at all with it,don't do it.Unless of course,you don't mind her becoming an ex wife.If you can get 35k scrapped up,go buy a duplex in Indianapolis or Cleveland.A property manager will take care of all the work for you and the wife will sleep better about it at night.

But a duplex won't give me a $1,800 return for a $35k purchase - that is the dilemma.  I don't mind her becoming an ex-wife, but she won't leave me.  I don't want to make her unhappy, but females are the weaker sex, and logic seems to escape her.

 Oy vey. That should bring some comments!

You should consult a tax accountant to see what might be available, but you would be adding a host of possibilities from depreciation to utilities to interest deductions. 

Honestly, based on your statement that your cash reserves are toast, I think your wife is probably right on this one. Nothing you do should trump having some liquidity, unless you want to find out how quick you can go from being an investor to being bankrupt.