The egress window is going to cost more than the kitchen

The rent difference is $300 a month, which is $3,600 a year. So the window pays back in a little under five years on rent alone, ignoring everything else. That doesn't sound insane to me for something that also makes the unit legal to sleep in.

@wren that math assumes the studio version rents at all and rents at $1,150. A basement studio with no natural light in the sleeping area is a hard rent in a lot of markets. Harrow, do you actually have comps for that or is $1,150 a guess?

The part I'd chase is whether your city's ordinance treats the finished basement as an ADU at all or just as finished space in the primary house. Those are different permits with different requirements in most places I've looked at, and the egress rule for a sleeping room usually comes out of the building code rather than the ADU ordinance. Two different documents, two different departments, and they don't always agree. Worth getting both in front of you.

I have a converted basement in a small building and the thing that broke for me wasn't egress, it was sound. Joists with no insulation between and you can hear every footfall. If you're living directly above this person for years, budget the sound work now while the ceiling is open. It's cheap right now and it's brutal later.

Option 3 is worse than it looks. Unfinished basement with rough plumbing stubbed and framing up is a specific kind of half-done that appraisers do not love and buyers discount hard, because they can see the money already spent and assume there's a reason you stopped. You'd be selling the story of a project that failed. If you're going to stop, stop cleanly or don't stop.

$61k of $95k with the biggest ugly item still ahead is the sentence I'd underline. What else is left after the window?

Here is how I'd sequence it. The egress question is a code question with a specific answer, and you don't have that answer yet, you have an inspector being noncommittal. Before you price anything, get the plans reviewer at the building department to tell you in writing which section applies to a sleeping room in a basement dwelling unit in your jurisdiction, because that varies by state and by adopted code year and it decides the whole thing. If the answer is that any sleeping area needs the window regardless of what you call it on paper, option 2 is gone and you're choosing between finishing and stopping.

Assuming the window is required, run the numbers on the finished version rather than on the increment. You're at $61k spent, $34k budgeted remaining, plus $17k window, so call it $112k all in if nothing else moves, and something else will. At $1,450 a month you're at $17,400 gross, and after taxes, insurance bump, utilities if you're not submetering, and a vacancy allowance you're probably keeping $11k to $12k. That's a roughly ten year simple payback on the build cost, before the value added to the house, which in many markets is real but is not the full construction cost.

That's a slower number than most ADU posts make it sound. It's not a bad number for something you're holding a long time. It's a bad number if you were planning to be out in three years, and your option 3 suggests you might be. Decide the hold period first. The window question resolves itself once you do.

@arbor the ten year payback is the honest framing and nobody in these threads ever writes it down. Cheap markets are worse, my area a basement one bed is $800.

Sorry for the basic question, what is a window well? Is that the metal half circle thing dug into the dirt outside a basement window?

@juniper yes, exactly that. It's an excavated area outside the window with a retaining wall so the window can sit below grade and still open into open air. For egress it has to be a certain size so a person can climb out and a firefighter can climb in, which is why they get expensive once you add drainage.

@harrow the thing that would worry me more than the $17k is that the inspector was vague at 80% framed. That means the plan set that got approved didn't resolve it, which makes me wonder what else in that plan set is unresolved. Did a licensed designer stamp these drawings or did you draw them?

Agreeing with @fathom on option 3 and going further. A stalled basement conversion also complicates financing for your buyer, because an appraiser walking a partially framed unpermitted-looking space tends to call for repairs or condition the appraisal. You'd be narrowing your buyer pool to cash and rehab loans at the exact moment you're trying to get out. Finish or restore, no middle.

Managing side of it: separate entrance, separate meter or a clean utility split, and a laundry the tenant doesn't have to ask you for. Those three are what determine whether you get a normal tenant or a tenant who is in your kitchen every Saturday. If the $17k window is competing for budget with a stacked washer dryer, do both or reconsider the whole thing.

Late but I'd want to know where the extra $17k comes from. You said the budget was stretched. Is this cash you have, a HELOC draw, or a credit card that becomes a different problem in eight months? The financing source changes which option is actually available to you and you didn't mention it.