Creating a finished living space in your basement is a great way to add value to your home and expand its usable square footage without having to alter its exterior. What’s more, you may see a significant return on your investment.
But before beginning your project, there are several factors to consider, including how much it will cost, whether you’ll need to hire professional contractors and how you should finance the expense.
Costs of finishing a basement
A 2020 study by HomeAdvisor notes that the cost of finishing a basement varies significantly depending on geographical location, basement size and professional versus do-it-yourself (DIY) work. The cost to finish a basement ranges from $2,800 to as much as $33,985 for a 400- to 1,500-square-foot basement. The average basement project costs around $18,400. To assess the cost of your own finished basement, you’ll need to consider the following categories, although your needs could vary:
- Permits: These are required for home additions that include electrical and/or plumbing and will cost you an average of $1,160.
- Contractors: Even if you plan to do some DIY work, you’ll need to hire licensed electricians and plumbers to ensure that the work is done to code. Licensed electricians charge between $50 and $100 per hour on average, according to HomeAdvisor. Licensed plumbers charge, on average, between $45 and $200 per hour.
- Framing: The cost of framing depends on the number of rooms your finished basement will have. Framing costs range between $7 and $16 per square foot to install top and bottom plates with studs (when including drywall, plan to spend from $20 to $30 per linear foot).
- Insulation: How much insulation will cost depends on what rating of insulation is used and whether you install it yourself or hire a professional. Depending on the type of insulation you use, you could spend as little as $0.15 cents per board foot or as much as $2 per board foot.
- Drywall: It costs around $2 per square foot to install drywall, but when you add in the cost of labor and materials, the price increases to between $60 and $90 per panel.
- Flooring: Costs will vary greatly depending on whether you plan to finish the concrete or use alternate flooring like carpet, hardwood, vinyl or laminate. On average, building a brand-new floor will run you from $9 to $31.50 per square foot.
- Waterproofing: Depending on the structure of your home, water leaks are a relevant consideration for any homeowner with a basement. Costs to waterproof your basement will vary depending on your home, but the average cost is $4,467.
- Fixtures and doors: This includes light fixtures, fans, hardware and doors. The cost of these items will vary depending on quality and who installs them. Light fixtures, for instance, may cost anywhere from $151 to $846, while door installation could cost between $478 and $1,525.
How to plan your basement finishing project
Not every basement finishing project is the same. Before diving in, take into account your finances, needs and goals.
- Consider your needs and neighborhood. It’s important to consider the other homes in your area and what people who move into the neighborhood may be looking for. If you discover that finished basements are popular in the area, you will likely see a return on the investment of moving forward with your project. However, if people in your area aren’t looking for finished basements, you may decide that this isn’t the right project for your home. Local real estate agents can provide details about comparable homes in your area.
- Define your finished basement goals. Whether it’s through Google, Pinterest or recommendations from friends, take the time to research and determine your short- and long-term goals for your finished basement. Have a well-documented plan that outlines exactly what you want in a finished basement: What will the space be used for? What kind of design do you prefer? Will you need plumbing?
- Get up to code. You’ll also want to check the legal requirements in your area. For example, a bedroom may require an egress window in case of fire, and bathroom plumbing will need to be up to code.
- Create a budget. How much can you afford to spend to finish your basement? Determine how much you are willing to spend and develop a budget, broken down by the cost categories listed above. You’ll also want to discuss your budget restrictions with contractors upfront. “Do not start a project until you have a number that’s realistic and acceptable for every single line item,” says David Steckel, home expert for Thumbtack. “When developing your budget, you can adjust materials until you get the right combination of what you want to have and what you can afford to have.”
- Decide whether to hire a pro or do it yourself. There may be some tasks you can do on your own, but in many cases a professional is the right choice. When selecting a contractor, start by asking for recommendations from people who have used one before. You’ll also want to obtain estimates from more than one contractor and ask for customer referrals from each.
How to save money on basement remodeling
Remodeling a basement can be pricey, but there are ways to cut back on costs.
Go for stylish but affordable
To lower your pricing, consider selecting midgrade materials that can be purchased as seconds or floor models. Think about the ongoing use of the area and opt for less expensive options on things that will have no detrimental long-term effect. For example, it’s not wise to save money on poor-quality building materials, but you could select low- to midgrade light fixtures, switch plates and more.
While a fully DIY approach when finishing a basement is often not the right approach, there may be some jobs that you can do to reduce the overall cost to remodel the basement, such as installing flooring and countertops or tiling a shower.
Enjoy the openness
Consider minimizing the number of separate rooms in your finished basement, as that will reduce your total cost. By embracing an open floor plan and fewer walls, you will cut costs on framing, wiring, drywall and doors. This also allows you to be flexible with the way you use the basement space. Perhaps you want a cozy hangout now, but in five years you might want a fitness room. Stay flexible and save money, too.
Track your budget
With a little research and assessment of how much you can afford, creating a budget is the easy part. What often gets neglected is tracking and sticking to your budget. Keep a log of all expenses associated with your basement finishing project and deduct them from your budget categories regularly. If you find that you’re about to overspend in one category, find another category to deduct from to avoid going over budget.
How to finance your basement remodeling
Even if you have the money available in savings to cover your basement remodel costs, you may want to consider financing options. There are a variety of loans, including home improvement loans, that may help you finish your basement without depleting your emergency savings. Here are a few loan choices to discuss with your bank or lending institution.
Personal loans are very broad in terms of what they can be used for. Finishing a basement is the type of expenditure that a personal loan may work well for.
A personal loan is structured like a standard loan: Once the loan closes, you will be charged interest immediately and will make your first principal and interest payment after one month. Personal loans pay a fixed amount that is distributed in a lump sum. Repayment terms are flexible, allowing you to select repayment terms typically between 12 and 60 months. You may also need to factor in origination or closing fees associated with a personal loan from your bank or lending institution.
Home equity loans
A home equity loan borrows from the equity in your home while using the home as collateral. This is also referred to as a second mortgage and is often used for large expenditures, like finishing a basement. Like personal loans, home equity loans have fixed interest rates and a set repayment term, although interest rates are usually lower.
Home equity line of credit
A home equity line of credit, or HELOC, uses the same concept as a regular home equity loan in that it allows you to borrow against the equity in your home while using the home as collateral.
The biggest difference is that the line of credit is open, or revolving, and is usually accompanied by a variable interest rate. Think of a home equity line of credit like a credit card with a specific credit limit. You can borrow against it and pay it back, but the line of credit will remain open so that you can borrow against it again. A HELOC can be a perfect solution for a large project, such as refinishing a basement, where costs may not be set in stone. However, use this type of loan with caution, as its flexibility makes it easy to go over budget.
The bottom line
Finishing a basement can be a practical, cost-effective way to add usable square footage to a home without changing the exterior. Finished basements can be used for everything from craft rooms to home gyms or even a home theater.
“The absolute best bang for your buck and the greatest return on investment as a homeowner is renovating your basement,” says Steckel. “Typically, all of the structural and major systems work is already in place so basement renovations can be faster and less complex.”
But before embarking on a basement finishing project, do your homework. This includes researching comparable homes in your neighborhood and requesting estimates from multiple contractors. Obtaining all of this information will help determine whether a basement finishing project makes sense for you.