You are taking the price of every property and increasing the cost of it by $5,000 without adding a penny of value. 

Investment Info:Single-family residence fix & flip investment in Long Beach.Check out this before and after picture of this fully renovated condo in Long Beach, CA.Lessons learned? Challenges?The heater was the on...

In my opinion you should NOT pass up the opportunity to secure solid, life long rapidly increasing income in a growing industry with a serious demand for talent with flight time.

The chances of you getting any additional money out of them are extremely slim to none.

You're right in that it's tough to justify an expense like that with an increase in rent alone.

The chances of them paying out the rest of the lease are SLIM!

As a flipper who purchases from wholesalers I  can vouche that when I get a chance to do inspections I'm very grateful because it doesn't happen often. 

And interest rates right now with the Fed increasing again will be in the 6's or so. 

NY state law will tell you how far in advance you have to provide written notice of an increase in rent....usually 60 days in many states, some are 30 days....then the debate will be do you do it all in one big jump or small increments as not to shock the current tenants enough to leave...... that's a debate on here in many posts

My only options would be to 1) keep the basement strictly as storage or 2) go through the process of getting a CO and deal with the potential tax increase on an already high tax property.