Renovating the Basement to Rent on Airbnb

For those of us who rarely enjoy a proper vacation, the lingering fear is always of what will or won't occur once we've escaped from the grind for a few days. Will it be possible to completely relax and recharge? Or will we slip into deep state of lethargic bliss, making it nearly impossible to return to work as we know it?

I spent this past weekend slowly savoring all that is the coast of Massachusetts and it was exceptionally lovely. I explored a quiet beach trail on a wildlife refuge, devoured lobster rolls at a roadside picnic table, visited a petting zoo at a local farm, had a barbecue with family, and escaped to the tip of Cape Cod for a debaucherous couple of nights with my best friends.

We found a last minute Airbnb rental located within walking stumbling distance of all the attractions, housed in the lower level of five bedroom cottage. I felt a twinge of jealousy when I met the seemingly care-free owner, just about to bike a couple of blocks to his summer bartending job. He explained that he rented the house out by the week for most of the summer, but filled in nights with Airbnb from time to time. The individual rooms ranged from $150-200 per night. Without knowing this guy's full financial picture, I was almost certain that he was making bank during the tourist season.

I didn't think much more of it until I was nursing a slight hangover on Monday morning over a mason jar of cold pressed coffee and Portuguese sweet bread French toast. Mmmmmmmm. And I began re-thinking my backyard airstream trailer Airbnb rental idea. Was I overlooking a blaringly obvious opportunity within my own house?

She's a brick…house

Want to know a little bit more about my place? A single level 1,400 square foot 1950s renovated ranch home, it was built into a hill making the first floor at the ground level outside of the front door. The unfinished basement is also a full 1,400 square feet with a single car garage and private back entrance. There are two large windows in the basement that allow for a unique amount of natural light.

I've always known that finishing the basement was an option, but now I had added motivation: using Airbnb revenue to fund the addition of a basement suite and generating side income.

Pros

+ House is located in a very trendy and popular neighborhood that is already highly sought-after on Airbnb.
+ Basement suite would have a private entrance.
+ Basement suite would include a decent-sized bedroom and bathroom.
+ Ample off-street parking.
+ Large amount of natural light.
+ Ability to provide parents (or other friends and family) a more private place to stay.
+ Ability to generate revenue once renovation has been paid off.

Cons

– Need to purchase a more compact washer and dryer.
– Moving the cat's litter box and food into the main part of the house – Eeeeeeek!
– Working around / with the single car garage in basement.
– Potential to be costly.

Revised (conservative) projections

Gross revenue: 10 days x $125 per night = $1,250.00
Less: 3% Airbnb host service fee = $37.50
Net revenue: $1,212.50

Note: A one-time $20 cleaning fee is built into this reservation. Airbnb also offers the option to add a security deposit.

Estimated monthly expenses:

$25 per month: utilities (including electricity, gas, water)
$40 per month: consumer disposables (refilling the coffee, local treat, soap, shampoo, etc.)
$160 per month: management* (8 hours per month at $20 per hour)
$200 per month: sales and occupancy tax (9.25% sales tax, 6% percent occupancy tax, and $2.50 room tax.)

*Tracking and paying yourself for the time it takes to run the business.

Estimated monthly profit: $787.50

To clarify, I'm definitely not giving up on my airstream trailer idea. I've just decided that I'd rather focus on this one first.

Readers: What do you think of my revised Airbnb rental plan? Have you had any experience renovating a basement?

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Discussions — 37 Responses

  • Zee @ Work-To-Not-Work May 30, 2014 on 7:40 am

    Oh, I like this one. Location, location, location! If you have your own entrance so you don’t feel like you might accidentally be bothering anyone and your own separate bath it sounds like an ideal rental.

    Some of the best tips for rentals is simply a binder with all of the FAQ you can think of. Places to eat, hikes, maps of town, instructions for wifi passwords. Pretty much anything that makes the renters not need to contact you makes it nicer for everyone.

    Hopefully your renovation isn’t too costly though, I could see this as an excellent opportunity.

    Reply
    • Addison Cash Zee @ Work-To-Not-Work June 5, 2014 on 5:16 pm

      Thanks for the binder suggestion, Zee! Great idea! I think it’s smart to try and anticipate questions.

      Reply
  • debs (@debtdebs.com) May 30, 2014 on 11:03 am

    I think that’s a grand idea! We rent our basement to coop students on 4 month work terms and this works for us (pays our property taxes). But since you have a separate entrance, this seems ideal for the type of rental you want to provide. How much do you think it will take you to finish the basement? 20K?

    Reply
    • Addison Cash debs (@debtdebs.com) June 5, 2014 on 5:17 pm

      I’m not sure how much of an expense we’re looking at. Right now we’re looking for a trustworthy contractor to get an estimate.

      Reply
  • Roadmap2Retire May 30, 2014 on 1:41 pm

    Interesting thought, Cashville. Those numbers do look tempting and need a serious consideration. Only feedback I have: Is there a demand for basement vacation rentals? People going on vacations are willing to spend some extra cash for the added comfort to escape the daily grind. Will they be willing to stay in a basement suite and spend $125 on it? You might need to tweak your numbers a bit and compare to other condo rental rates and/or hotels.

    Best of luck. A basement suite can be rewarding and we considered it and tried looking for a house when shopping for real estate. Eventually, we couldnt find a decent one without the added premium – so, we skipped on the idea.

    regards
    R2R

    Reply
    • Addison Cash Roadmap2Retire June 5, 2014 on 5:19 pm

      You make great points, RTR! One of the great things about Airbnb is that it gives you the ability to see the demand in a particular area. I plan on sharing that information in a follow up post.

      Reply
  • E.M. May 30, 2014 on 3:18 pm

    It sounds like a decent idea to me! I lived in a basement apartment for almost a year, and I wasn’t a huge fan of it. Our apartment only had tiny windows, though, and it was much smaller than 1,400 sq ft. I think I would be open to crashing in a place like that for a few days, as long as it looked comfortable and inviting.

    Reply
    • Addison Cash E.M. June 5, 2014 on 5:30 pm

      Thanks for the feedback, E.M. I think the key is creating a really unique and comfortable space that really stands out on Airbnb. Also, building good reviews.

      Reply
  • Kurt @ Money Counselor May 30, 2014 on 3:24 pm

    Our house has an autonomous rental “suite” (think mother-in-law apt) in the lower level. We rent it out on a temporary basis–one week to 2 months. This gives us some extra income, but also allows a break from having tenants and being stuck long-term with a tenant we’re not wild about. Meet lots of interesting people from all over the world. (We live in a popular vacation area.) It’s been all positive in my mind. Our house came with the suite, so we did not have to renovate.

    Reply
    • Addison Cash Kurt @ Money Counselor June 5, 2014 on 5:33 pm

      Thanks for sharing, Kurt. That sounds like an ideal situation. I’m sure you’re able to make a lot more money that way, as well.

      Reply
  • Income Surfer May 30, 2014 on 3:52 pm

    Definitely a good call to focus on this project first. You are far less likely to get push back from your neighbors. I look forward to hearing how it turns out.
    -Bryan

    Reply
    • Addison Cash Income Surfer June 5, 2014 on 5:35 pm

      True, Bryan! Despite living on a main street, my house is set back and provides quite a bit of privacy from the neighbors. The backyard is nearly impossible to see from the street and provides plenty of off-street parking.

      Reply
  • Stefanie @ The Broke and Beautiful Life May 30, 2014 on 7:52 pm

    Stumbling distance is key 😉

    As for air b n’ b, I think it’s a great idea. I’m always subletting my place while I’m away and I’ve done it using air b n’ b a few times. If I had space to have someone there at the same time as me, I would.

    Reply
    • Addison Cash Stefanie @ The Broke and Beautiful Life June 5, 2014 on 5:37 pm

      Thanks for sharing your positive Airbnb experience, Stefanie. Honestly, I haven’t heard anything negative about it in a long time.

      Reply
  • Catherine May 31, 2014 on 11:27 am

    I know of a couple who live in the heart of our city and have had great success with AirBnB rental and it sounds like a similar situation to yours. They make about $2000 per year just renting their basement sometimes more if they rent the entire house when they’re travelling!

    Reply
    • Addison Cash Catherine June 5, 2014 on 5:37 pm

      That’s encouraging to hear, Catherine! I would love to see an extra $2,000 per year.

      Reply
  • Jessica Moorhouse May 31, 2014 on 9:19 pm

    That’s awesome! Great way to make some extra income.

    Reply
    • Addison Cash Jessica Moorhouse June 5, 2014 on 5:38 pm

      Thanks for visiting and sharing your feedback, Jessica!

      Reply
  • Nelson June 2, 2014 on 5:18 am

    How much could you get for the basement if you just rented it out to a tenant full-time? If you could get $800 per month and do very little work, it would probably be more attractive than having to clean up after people and restock their coffee. Plus, you wouldn’t have to pay all those room taxes.

    Reply
    • Addison Cash Nelson June 5, 2014 on 5:41 pm

      $800 per month would definitely be easy to get from a tenant, but I think I can make more by renting it out by the night or week. It’s risky, but I’m confident it will pay off. Also, Kurt raised a great point about dealing with annoying tenants above.

      Reply
  • Lauren June 2, 2014 on 3:11 pm

    Sounds good! I know basement renovations can be pretty costly, but you should get a return on that investment if you ever sell the house.

    Reply
    • Addison Cash Lauren June 5, 2014 on 5:42 pm

      Definitely, Lauren! In the worst case scenario, the home value is improved and I have a more private place for my parents to stay when they visit.

      Reply
  • Derek @ MoneyAhoy.com June 4, 2014 on 5:58 pm

    We plan to be in the process of looking for a new home when I relocate for my job within the next couple of months. I plan to make it a priority to find a property with some type of area that we can rent out with AirBnb. We have little kids, so it kind of freaks me out to have a stranger in the house. But, if we can find something like what you have or a detached garage with room above, that would be perfect!

    Instead of trying to make things perfect, have you considered trying to put it up “as-is” to see what kind of interest you will get. It would be a real shame to sink a ton of cash only to have no visitors show up…

    Reply
    • Addison Cash Derek @ MoneyAhoy.com June 5, 2014 on 5:44 pm

      Thanks for sharing, Derek! A detached garage with an apartment above would be perfect. If this project and Airstream trailer rental are successful, that will have to be our next step!

      Reply
  • Dan @ Our Big Fat Wallet June 5, 2014 on 2:06 am

    that sounds like it has some serious potential. I don’t have any personal experience with renovations but I hear they do tend to go over budget most of the time, so I think its important to budget for that. And I’ve seen compact washer/dryer units that fit into a closet for smaller condos

    Reply
    • Addison Cash Dan @ Our Big Fat Wallet June 5, 2014 on 5:45 pm

      Thanks, Dan! Our washer and dryer are seriously old, so I wouldn’t mind an upgrade to something more compact and energy efficient.

      Reply
  • Andy@artofbeingcheap June 5, 2014 on 3:27 am

    Sounds like an awesome idea since you have such an ideal setup. Why not try this: Figure out which is easier, the trailer or the basement renovation and try that one first. If you don’t hate it too much and it makes you as much money as you thought it would then you can expand to the second, more expensive idea and have yourself quite a little hotel.

    Reply
    • Addison Cash Andy@artofbeingcheap June 5, 2014 on 5:46 pm

      Thanks for the feedback, Andy! I think the basement will be easier, but I’d love to have multiple rentals on our property eventually!

      Reply
  • Hannah @ Wise Dollar June 5, 2014 on 9:45 am

    Renovating basement sounds like a pretty costly thingy. But I still think that is a great idea! I am looking forward to your next post in the new rent on airbnb.

    Reply
  • Addison Cash June 5, 2014 on 5:47 pm

    Thanks for the encouragement, Hannah. I can’t wait to get started on this project!

    Reply
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  • Tom November 13, 2014 on 9:30 am

    Basement conversions generally aren’t cheap, but they can be very profitable. Putting aside the potential rental income for a moment, basement conversions can add so much value to your home you wouldn’t believe it. Some experts claim that the value of a property can go up almost 20% after a conversion.

    Reply
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  • Brent July 29, 2017 on 12:11 pm

    Hi Kate,

    My wife and I are considering a basement renovation for renting out on AirBNB. We have experience renting our house on VRBO and renting our RV out, so we’re not strangers to the odd pain the ass that comes with renting.

    So my question is Kate, did you follow through and create a rental in your basement, and if so, how is working out.

    Our situation is almost identical to yours – perfect location, parking, separate entrance, etc.

    Reply
    • Kate Dore Brent July 31, 2017 on 8:06 pm

      No, we haven’t renovated the basement yet. But it’s definitely on our list for the future! Our neighborhood has only grown more popular. I plan to refocus on the house again once I have passed the CFP exam 🙂

      Reply