Mike McClintock, a former homebuilder, writes a syndicated newspaper column on home construction and repair.

Almost everyone could use more living space. But at $109 a square foot—the average cost of construction nationwide for new and existing homes—it is worth looking into unfinished space you already own, like the basement. You can make it fancy or just functional, a home theater or a home office. But step one in every remodeling scenario is the same: It has to be dry.

That’s easy enough to accomplish above ground. It’s tougher downstairs because
puddles in the yard and water draining from the roof inevitably head for that big hole in the ground under your house. Without thorough protection, particularly in a waterfront home, basements can quickly turn into swimming pools.

Outdoor water protection

Several so-called waterproofing systems are really leak collection systems that only deal with water once it’s inside. That may be fine in a rough space housing appliances, some storage and a heavyweight dehumidifier. But chugging sump pumps and dripping interior drains don’t fit too well in a new family room. If you want a basement dry enough to be finished living space, don’t fight the water battle inside. Deal with water outside in the yard before it gets to the house. There are several ways to do it. Some are easy homeowner projects. Others—like the first two options listed below—involve so much earth moving that even diehard DIYers will need a landscaping or general building contractor with excavation equipment.

Dig a dry well. Installed mainly on flat sites, a dry well builds more water-holding capacity into the yard. The idea is to dig a big hole and fill it with rocks, gravel and other porous materials to create a hidden reservoir. The bigger the hole, the more water the yard can handle. Dry wells often don’t work well on sites with dense clay soil or a high water table, for instance, near a lake or stream at almost the same elevation as the house. In plain language, if you dig a shallow hole and it immediately fills with water, digging a deeper hole isn’t likely to help.

But a dry well that’s five or six feet deep and four or five feet across will add considerable drainage capacity—often enough to handle the flow from downspouts in heavy rains that otherwise would overwhelm basement walls.

Install an area drain. This method is used mainly on sloping sites to keep water from reaching the house. The idea is to intercept the flow and funnel it to a safe release point where water can’t flow back against the building. The drainage trench should be installed on the high side of a sloping site near the edge of the property instead of close to the house. Construction can vary depending on the type of soil and amount of water needed to be diverted.

Every area drain has two basic components. First is a gravel-filled trench often four feet deep or more and several feet wide. The gravel is so porous that water in and on the ground drops into the trench instead of toward the house. In the trench, water flows into the second basic component: perforated drainpipes set on about six inches of gravel and sloped slightly to the release point. To conceal an area drain (or dry well), stop the gravel fill a few inches short of the surface, cover with a double layer of filter fabric and then sod. The tough mesh fabric lets water drain through, but it filters out most of the silt that can eventually clog the system.

Grade at the foundation. Decrease the amount of water trapped near the foundation by filling in gullies around the house. Better yet, add enough soil to create a gradual slope that helps conduct water down and away from the building, even if it’s only for a few feet.

Drain from a downspout. To reduce water-trapping erosion at the foundation, diffuse the flow from downspouts by emptying them onto splash blocks. Another option is a perforated drain hose that extends from the downspout to dribble water onto the ground away from the building. Some of these diffusers are spring-loaded and automatically roll up out of the way when it’s not raining.

Extend a downspout. Connect elbows to the ends of downspouts and add several feet of straight pipe to deposit roof water farther away from the house. You can install underground pipe systems to carry away the water, or simply lay sections of downspout on the ground to bypass the foundation on a sloping site.

Patch foundation cracks. Inside and out, close cracks in poured concrete or block foundations with hydraulic cement. Scrape debris from the crack and force in the cement, which swells slightly as it hardens to fill small voids. The cement works even if the crack is wet.

Recoat the foundation. The most costly project of last resort—but also the most foolproof way to make a wet basement dry—is to re-excavate and waterproof the foundation. Houses even 20 years old shouldn’t need this work. But waterproofing has come a long way: it used to (and sometimes still does) consist of hot tar slopped over the masonry before back-filling with dirt—a simple system that works well for a few years. Now there are several modern systems that work better and last longer. Many use sheets of rugged, rubberized matting applied to the foundation over an asphalt adhesive base. Some of the most thorough systems top that protection with porous panels that allow water to enter and then drop down to the footing into collection pipes before it ever comes in contact with the waterproofed wall.

Designs for basement ceilings

Most basement ceilings are crammed with pipes, wires and ducts—with a Catch-22 twist. You need to conceal them to create finished living space but need access to make adjustments and repairs without ripping apart new drywall. One system deals with both issues: a suspended ceiling with removable acoustical panels in tracks. This old-fashioned ugly duckling of home decor is still a winner in the basement. It will cost you a few inches of headroom. But modern systems come in many patterns and finishes, have better resistance to mold (some ceiling tiles are washable) and offer hidden suspension systems and other improvements.

For one, tracks now come in several finishes. That sounds promising, although basic white tends to blend in and unify a field of tiles. Think twice about a wood tone, dark color or metallic finish. They emphasize the support grid and tend to make ceilings seem lower, which is not the best solution in most basements. Track systems have also been improved. They used to have a wide lip on each side to hold the tiles, partly because old tiles used to droop when damp and needed the support. Modern tracks (many only a half-inch wide) provide a crisper look. Some manufacturers also offer thin suspension systems that tuck into the tile edges, leaving a seam but no visible support.

Easy floor finishes

There are several ways to finish the basement floor once the area is waterproofed. You could smooth out rough concrete and lay snappy-looking wood laminate. You could build up uneven floors with sleepers and plywood and lay solid flooring like 3/4-inch strip oak. But in a dry space, carpet over padding is the fastest and least expensive finished floor. It is comfortable underfoot, great for rough-and-tumble kids, a good sound absorber in an acoustically hard room as well as a good insulator.

Building out the walls

Finishing rough masonry walls makes the new basement space more comfortable and energy-efficient, and today, there are many ways to do it. For instance, there are proprietary products, such as Owens Corning’s basement finishing system. It replaces conventional lumber and drywall construction with a vertical grid of faced insulation panels. Like acoustical ceiling tiles, the wall panels can be removed from their trim components to provide access to wiring and the foundation wall.

The old standard is furring and drywall: 1-by-2s set 12 or 16 inches apart on center covered by half-inch thick gypsum panels, or paneling if you prefer. But a few upgrades wouldn’t hurt; for instance, adding foam-insulating panels between the strips and a cover of plastic sheeting (a vapor barrier) before drywall is applied. On the plus side, furring can be shimmed (built up with wedged wooden shingles) to take the ins and outs and rough edges off foundation walls. But shimming a wavy wall requires a lot of time to produce a flat support surface.

The old standard also has some other drawbacks. Furring strips sink to the bottom of the barrel when it comes to lumber quality. They’re often twisted on delivery and difficult to work with. And even straight pieces often split when they’re fastened to the wall. On top of that, the skimpy lumber provides only marginal nailing support and hardly enough room for crucial new wiring, outlets and switches.

Give up a few more inches of floor space and you can eliminate all the drawbacks by building a new stud wall. You could get by with 2-by-2s because the wall doesn’t carry any structural loads, just drywall. Better yet, use 2-by-4 studs set 16 inches on center between a horizontal base and cap (shoe and plate).

Walls can be framed on the floor and tipped into place. The wall work on your basement project will be faster and easier this way. And a full-size partition wall eliminates shimming and provides better nailing support, more space for insulation and ample room for new electrical lines.