How to Turn a Finished Basement Into a (Legitimate) Apartment for Extra Income
For most homeowners, the basement is just a place to store things. Even ready-made basements are often a problem – most of us default to throwing old carpet, sofa and TV in there and calling it “entertainment” space or “man cave” and then never using it. Or we slowly fill it with crates until it becomes a moldy maze for unlucky visitors to fall into. But basements are a huge opportunity if you want to increase your income, because they can be turned into legal apartments and rented out for money.
Once your basement is finished, the process of converting it into a real apartment is quite easy from a legal point of view, and the financial benefits can be huge. But even with a basement ready, you can’t just install a bed and put it up for rent. You need to make sure this place is safe and legal.
What should be in the basement?
First of all, a disclaimer: You will need to familiarize yourself with local building codes and laws. You need to obtain a certificate of ownership for your new apartment. In some areas, basement apartments are declared completely illegal, and different local authorities will have different requirements for legal apartments. Before doing anything, make sure you know what exactly is required, including:
- Dimensions. Your local housing authority will set minimum legal apartment size requirements . The International Housing Code (IRC) requires you to have at least one 120-square-foot living space, and many US states simply follow this minimum, while others slightly increase that number. You also need to consider ceiling height – IRC requires at least 7 feet, which can be a problem in basements, especially if you need to plaster the ceiling to cover ducts or wiring. Again, local building codes may deviate from this minimum.
- Access. To be a legal apartment, your potential tenant will need a separate entrance – they are not required to climb stairs and go through the main house to get in and out. You also need to check your local fire codes to make sure there are no additional requirements. And some local authorities require a second exit from the premises, which can be an “exit window” (see below) or a second door.
- Window. Basements tend to be dark rooms without a lot of windows, which can be a problem for you. Building codes generally require an “exit” window (large enough to climb out of) in every room, and many areas have standards for how high they can be above the ground. There are specific requirements for every aspect of the window, so be sure to find out what is required.
Once you are sure you meet these basic requirements, congratulations: you can turn your basement into a legal apartment. But there is still work to be done.
Adding a bathroom and kitchen to the basement
If your basement already has a bathroom and a kitchen, you are a golden man. If not, check to see if it already has the necessary “rough” plumbing and electricity – many builders include this in case the owner wants to finish the basement later, or perhaps the previous owner started a basement renovation and then gave up.
If you don’t have plumbing, you will need to do this because residential apartments generally require access to the bathroom and kitchen. According to Home Advisor , a basement rough finish costs about $4,000, and the total cost of adding a bathroom to the basement will set you back between $6,000 and $15,000. A sample kitchen will cost about the same, and the kitchen itself will cost you between $1,000 and $20,000 depending on how big and lavish you decide to make.
You don’t have to divide your basement into different rooms as long as you have enough windows to meet your local codes – you can call your apartment a studio and define different spaces with furniture. Keep in mind that one and two bedroom apartments get a lot more rent than studios, so putting in some interior walls to define space might not be a bad idea. And you don’t have to split utilities – you can just include them in your rent if you don’t want to mess around. But the apartment will need to be heated.
Another consideration is dampness and water: in many areas, basements require some form of waterproofing. If your basement is finished, this may have already been done, but you will need to confirm that it is up to apartment standards. If not, you will need to complete this work before you can legally rent a space.
Finally, you may need to check the room for mold, lead, asbestos, or other problems. Again, you will need to know the records you need to get before you can get a title deed and start renting a place.
Whatever you do, resist the temptation to drop the law and rent space discreetly. Not only will you put your tenant’s safety in question, you will expose yourself to significant legal risk, and if your tenant goes against you, you will have less legal ability to deal with it. Even a finished basement may require an investment to turn into a legal apartment, but the potential income may well be worth it.