Remodel a Basement or Add a Second Story? The Pros and Cons of Each Project

Updated: Feb. 07, 2023

What are the pros and cons of finishing a basement or adding a second story?

Is it better to remodel a basement or add a second story? Well, it all depends on where you live and the type of house you have. To be sure, both projects cost a lot of money and time. You might live in an area where houses don’t have basements so adding a second story is really the only way to add additional rooms. Plus, in order to remodel a basement, it’ll have to be finished already. If you’re planning to remodel your basement, you must know what a daylight basement is.

Want to know how to finish a basement. You’ll need to consider these things before finishing a basement and obtain the proper permitting. Here’s the cost of finishing a basement.

Basement Remodeling Cost

HomeAdvisor estimates the average cost of finishing a basement to run between $6,500 to $18,500 with a return on investment of about 69 percent. Remodeling a basement on the other hand, i.e. adding a living room or play room or home office can cost between $10,000 and $30,000.

But know that appraisers don’t count below grade square footage in the total square footage of a home. Unfinished portions of a house do not get calculated into the square footage of a home either. Though not counted in the total square footage of a home, a remodeled or finished basement will be given value, although at a lower rate than the main living area.


Market Conditions

When considering remodeling a basement you should think about the market conditions. If the market is down, chances are that it’ll be tougher for you to recoup the cost of the remodel. But it could also help the home sell faster. These are 12 things to watch with a home appraisal.

If you’re planning to remodel your home, find out whether you can add a basement to a house.

Basement Remodeling Pros

  • A basement remodel can increase your home’s selling price but don’t go crazy on the customization. You might want a personal gym in the basement but chances are few potential buyers feel the same way.
  • A basement remodel can allow you to add a bedroom or a bathroom as well or even a living room — all additional usable living area.
  • Relatively affordable.

Basement Remodeling Cons

  • You’ll have to have a finished basement or will need to finish a basement
  • Finishing a basement isn’t always as easy as throwing up some drywall. If your basement tends to have a lot of moisture, it may not be a good candidate for a finishing or remodeling project. Take a look at these tips on how to dry a basement for good.
  • There’s a lot of framing work involved with finishing a basement and you need to maintain access to valves and cleanouts among other things as you finish a basement.

House with a second story additionIriana Shiyan/Shutterstock

Adding a Second Story Pros

  • A second story addition will add a lot more square footage to your home.
  • Increases home value. The return on investment is usually 65 percent of the cost.
  • Adding a second story is good when you don’t have room to build out.

Adding a Second Story Cons

  • Your house becomes a mess.
  • Adding a second story can cause a lot of stress.
  • A second story addition might put you out of your house for a while.
  • Second story additions are complex and your foundation must be able to handle the additional weight.
  • Engineers must draw up plans, which is an additional cost.
  • A second story addition can cost more per square foot than an addition on the ground.
  • Your city might have height restrictions on houses so be sure to check those before planning a second story addition.

What Does it Cost to Add a Second Story

A lot. For a full second story on a 2,000-square-foot house, the cost to add a second story can run between $150,000 to $200,000, according to Legal Eagle Contractors. For a partial second story addition, the cost can range between $90,000 to $120,000 for an additional 500-700 square feet. HomeAdvisor estimates a second-story addition usually costs between $100 to $300 per square foot.

Is it Cheaper to Add a Second Story or Build Out?

Both are expensive but a build-out addition might cost more because you’ll need to pour a foundation and you’ll have to build a roof for the addition, too.

Check out affordable ways to dry up a basement for good in the video below.