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Finishing a basement — or turning it into a livable, and perhaps even rentable, area — is a popular project among homeowners who want to add space and value to their home. This project has a particularly high return on investment, averaging around 70 percent of the cost. And those numbers can rise even higher, depending on the market. Deciding to finish your basement can add a significant amount of equity to your home.

Since an average finished basement can cost anywhere from $6,500 to $18,500, saving money where possible is important. Here are a few cost-effective ways to turn your basement into an area that people can enjoy — no matter the occasion.

Plan out Your Expenses Early on

Before you get started, take time to plan. What are your goals for finishing the basement, and what does it need? Will you need to install walls, floors, and plumbing? Will there be a big highlight, like a wet bar or an entertainment room? And, most importantly, what is it likely to cost?

Use this time to look into a home improvement loan to help fund your project effectively. However, for a long-term finishing project, you may want to consider a home equity line of credit (HELOC) or home equity loan.

Budget for Required Installations

Certain installations are required when finishing a basement. Ensure that there's room in your budget for these installations as they may include projects such as:

  • Waterproofing walls and floors with moisture barriers; this is particularly important for underground basements
  • Making sure there is a properly installed egress window for safety codes
  • Adding sufficient ventilation to avoid fume build-up
  • Conducting a radon test to measure levels of radon gas, if necessary
  • Installing a sump pump

When in doubt, consider hiring a local professional contractor to inspect your basement, and make recommendations for things you may not know much about.

Leave the Ceiling Clear and Use an Open Floor Plan

By leaving your basement ceiling open, you can skip paying for "drop" ceiling panels and make your basement feel roomier (most finished basements need around 7.5 feet of height). Consider painting the open ceiling and its fixtures to make it feel more uniform: white is the recommended color as it can help brighten the room.

Walls tend to make basements feel crowded or maze-like. Instead, use an open floor plan with room dividers where necessary. You can save on wall materials while keeping the basement as open as possible — which also makes lighting easier to manage.

Combine Drywall and Insulation with Insulated Wall Panels

Insulation and drywall can be time-consuming and expensive, particularly if you have to hire outside expertise. For a more affordable option that you can install yourself, look into basement insulated wall panels. These panels come in a wide variety of appearances, including wood paneling, and they're an easy way to save.

Stick with Vinyl Flooring Where Possible

Avoid moisture-sensitive flooring in the basement, like wood or carpet. Vinyl is a useful substitute because it's highly affordable, relatively easy to install, and can mimic a wide variety of materials such as tile and hardwoods.

Utilize Your Existing HVAC System

If you're planning on turning your basement into a fully separate living space that you can rent out, it will probably need its own heating and cooling systems. Otherwise, you can save a lot of money by connecting basement venting to your existing heating, venting, air conditioning (HVAC) system that your whole house uses.

This simply adds the basement area as another room that will be heated or cooled according to your thermostat settings. Make sure that your HVAC units can handle the extra space first, then connect your basement to existing ductwork.

With these cost-effecting tips, you can work on finishing your basement in no time! Be sure to contact a contracting professional for any tasks that you are unsure about.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

By selecting any external link on www.Key.com, you will leave the KeyBank website and jump to an unaffiliated third party website that may offer a different privacy policy and level of security. The third party is responsible for website content and system availability. KeyBank does not offer, endorse, recommend, or guarantee any product or service available on that entity's website.

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