Approximately two years ago, my wife and I attended a party at her coworker’s house; a gathering of medical professionals such as herself. At these events, we normally split up and socialize independently. Mrs. BF and her cohorts talk about enlarged prostates and the weirdest stuff people get stuck up their asses, and I find the other beer nerds and discuss non-bodily fluid topics.
This party was different. I noticed that my wife was engaged in a lively discussion with a nurse that she normally didn’t talk to that much. She seemed really excited, so I assumed they were talking about a prolapsed colon or something equally disgusting (why do medical people enjoy this crap so much?!?) When I met up with my wife later that night, she told me what they were actually talking about: house hacking.
The coworker owned a house that had an in-law setup in the basement. As a way to subsidize her mortgage payment, she started renting out the basement ‘apartment’. In fact, renting it out on Airbnb was nearly covering her mortgage every month! Mrs. BF was so enthralled by this idea, she insisted that we immediately start converting our basement into a rentable space.
A little background. My wife and I have been participating in shared-living arrangements for decades. I own a multi-family house, and also shared my unit with a roommate for the 8 years I lived there. My wife had always shared her apartment with roommates until she moved in with me. So buying a single-family home in 2015 was a little bit ‘against our nature.’
Enter house hacking.
By renting out a portion of our home, we could get over our guilt of buying a SFH, and also reduce our effective cost of living. This would allow us to contribute the additional savings to our investment buckets, and turbocharge our path to FI.
Now the hard part: how do we turn our single-family home into a rental property, while still living in it?
Planning the Basement Bungalow
We live in a single-story ranch style home with no obvious place to build an in-law apartment. Fortunately, the basement has some unique features that make it ideal for conversion into livable space. Due to the grading of the yard, half of the basement is above ground. This side of the basement has walkout access and two double-hung windows, which allows for plenty of sunlight and multiple entries/exits to a potential apartment. Additionally, there is a stairwell from the garage to the basement, so one can access the apartment without going outside or walking through the main floor of the residence.
Sadly, this half of the basement was my Man Cave / home brewery, a place where I spent many Saturday mornings. The things we sacrifice for love (and money!).
We appropriated half of the basement, roughly 500 square feet, to become The Basement Bungalow. In order to maximize the functionality of the space, we decided on a studio type layout. One side of the room would be the kitchen and dining area, while the other side would be the living/sleeping area. Also, we needed to add a bathroom to make it a fully-contained apartment.
And with that, we were off to the build stage!
Once we make a decision, there is no slowing us down. Within days of weighing whether The Basement Bungalow could be a reality, we were rabidly working downstairs. The faster we finish, the faster we can start collecting rent.
Since Mrs. BF and I are frugal as the day is long, we decided to do everything ourselves (with the exception of plumbing). This can only mean one thing- tons of Google searches and YouTube videos!
I picked up a framing nailer and compressor, and got to work. After watching a few tutorials on framing, I borrowed the best ideas from each and started putting up our walls.
I added 1/2″ foamboard insulation as a spacer and insulator from the cold cement walls. We had to get creative in some areas in order to frame in the main support beam, lally columns, and some first floor plumbing.
Electric / Insulation
At first, I was a little nervous about doing the electrical myself. Outside of changing a few outlets, I had not done any real wiring or electrical work. No problem here- I just Googled the crap out of the topic until I felt like an expert. I also brought in an electrician friend to help me map out the various circuits, and instruct me how to do everything to code.
One consideration when building an apartment below your bedroom- sound insulation is critical! Thankfully, we planned for this, and used soundproofing insulation between all the ceiling joists and in the walls that separated the apartment from the rest of the house. We also added R-30 insulation against the exterior walls of the basement, for better heat retention.
Walls & Flooring
Once the structural work and wiring were complete, we got the OK from the town inspector and then began closing up the walls.
While my ‘specialty’ was designing, framing and wiring the place, Mrs. BF really shines when it comes to sheetrocking/taping/sanding and (apparently) flooring. In a matter of a couple weeks, she had the whole place painted and was putting in the floors. Did I mention she was 5 months pregnant at this point? She’s a champ!
Kitchen and Bathroom
Next, we had to fabricate a small kitchen and add a bathroom. The kitchen was fairly straightforward. We had a small section of cabinets custom made for us. Our friends donated their old stove. Mrs. BF and her mom elegantly tiled the backsplash and we used granite tile for the countertops. Fact- granite tile costs almost nothing, and it looks pretty good too!
To complete the bathroom, we did everything we could, and then brought in a plumber to complete the work. We jack-hammered the floor, dug trenches for drains and another hole for the drain pump.
Because I didn’t have the testicular fortitude to do the plumbing for fear of flooding the basement, we had to pay a premium for this work ($3,500). However, considering how much money we saved by doing everything else ourselves, I could live with the added cost.
Finish, and Furnish
On to the final touches. We painted, added trim, hung the doors and closet. I added an electric baseboard heater and thermostat, since the apartment would not be heated by our existing setup.
Due to our rental strategy (see below), we then proceeded to furnish the apartment. We got the bed, dresser, coffee table and couch for free (!!!) from a friend who donated it all to us because she was upgrading. We added a TV, kitchen table, linens, and all kitchen supplies from various sources on the cheap.
And voila! The Basement Bungalow was complete!
The total cost of the Basement Bungalow project is detailed as follows. 90% of the work was completed in about 90 days, split between nights and weekends. It was a hectic time, as we were also preparing for Baby BF’s arrival, but the end result has been quite rewarding so far.
The total cost of the project, from empty concrete space to finished, furnished, apartment was approximately $15,000. This works out to roughly $30/square foot. When compared to typical costs of new construction and/or remodel, I think we did a pretty good job with our budget. If I had bucked up and done the plumbing myself, we could have completed the project under $25/square foot.
Since the labor was almost exclusively ours, the main cost was materials. We tried to save money wherever possible. For example, most of the paint was on sale because it had been returned to the store and was in the discount section. A few items were from the ‘scratch and dent’ section.
We borrowed tools when possible, and only bought the items that I can definitely get more use out of (compressor, nailers, jigsaw).
Our Renting Strategy
As I mentioned, we decided to fully furnish the apartment. Obviously this would rule out renting in the traditional sense, where someone signs a 12-month lease and then moves all of their stuff in. We initially were thinking of going the Airbnb route, but then we figured out our niche: travel nurses.
There are thousands of medical professionals that work as nomads, traveling from hospital to hospital and doing short (3-5 month) assignments. Since their stays are so short, travel nurses look for furnished, short-term rentals. These kind of living arrangements are not all that common, and often are quite costly. “Extended Stay” hotels are often more than $2,000 per month, and a monthly Airbnb rental can easily exceed this cost.
We have the added benefit of living very close to a prestigious, University-affiliated hospital that serves as an attraction for traveling medical professionals. So far, we have had no problem renting our Basement Bungalow for $1,100-1,200 per month, all-inclusive.
Amazingly, renting out half our basement covers nearly 100% of our mortgage!
Progress Report – 15 Months of House Hacking
Thus far, our renting experience has been very positive with the Basement Bungalow. We have had three nurses at this point, all of which have been pleasant, easy tenants. They typically sign on with a 3-month contract with the hospital, but they have the option to extend the contract to 5 months. All the renters have extended their stay so far.
The place has been continuously rented since last August, outside of a 3 week gap in July. We’ve had no complaints from our renters, and we have had no trouble with them either. Okay, I did have to exterminate a couple huge spiders, but that’s it.
Finally, I’m excited to say that we will officially break even with the receipt of October rent. We could stop renting or repurpose the apartment for any reason now, and not feel guilty about the money we spent renovating the place. I expect at some point in the future we will use the apartment for our purposes (long-term stay of traveling friends, a true ‘in-law’ apartment, or a rec room for our family). In the meantime, though, it will be a steady stream of additional income that we can use to continue our path to FI.
Thanks for reading about our house hacking strategy. What kind of house hacking have you done with your primary residence? Let me know in the comments section below!