Are basement apartments worth it?

[William S.]

I'm closing on a duplex house hack that is located (East Wauwatosa) in a good school district and two blocks from a trendy downtown district. The renters in the area (for duplexes) are mainly young professionals who are couples that have no kids yet or have kids who are in kindergarten/elementary school. I'm debating on a couple of options...

Option 1:

Finish the basement into a one-bedroom apartment. Doing this would allow me to live for free in the duplex, now triplex.

Option 2:

Take the lower unit and finish the basement into more living space. That would make the lower unit a 3 bed, 2 bath, leaving the upper unit as a 2 bed 1 bath. I would get great returns after I move out, but not during the house hack.

After running the numbers for both options, when I move out and convert it solely into a rental it's essentially a wash as far as ROI . Option 1 though makes the house hack $0/m for me to live there though.

I have only done light rehabs so no experience yet with major projects. I'm looking for feedback from those who have done something similar. Based on your experience, and the given area I am in, is one better than the other?