Expert: Connie Wildasinn-Broker,GRI,Realtor® - 1/4/2012

Question
QUESTION: I just purchased a 900 sq. ft. 2 bedroom, 1 bath home back in April near Los Angeles. I am considering either adding an additional full bathroom off the master bedroom and/or enclosing the patio to make a sun room. My questions are: 1. What is the better addition to make in terms of resale value, resale potential, return on investment? 2. Do you think the investment is worth it in terms of resale value, resale potential, and return on investment? I'm curious if a 2 BR, 2 BATH is much more marketable than a 2BR, 1BATH? I am also considering adding an entire master suite, complete with full bedroom and bath, making the home a 3+2 but not sure if the extra expense would be justified in terms of return on investment. If you had the money for any of these additions, which one(s) would you do? Or should I just leave the property as-is? I appreciate your feedback.

ANSWER: Hi Michael,

All depends... in a down market (what we are experiencing now) 2/1 is the bottom of a single family home and 900 sq feet is about as small as you'd want to get it...

The additional Bath is a plus (but can't look like an addition#

The enclosed Patio least I'd say... unless you can make that a real living space 'den' family room etc... other wise its just nice outdoor enclosed space to play with.

Check your comps...your 3/2 will get good resale, but at what price is what you have to ask yourself....

Most remodels have a 'return on investment' 50%, 75%, 82% etc... notice not a lot of 101% or over, and if I was spending money I would want 120% or 110% something not to loose money...

I tell most of my clients and friends, do a remodel because you get the enjoyment not for the next buyer, if you do it 'wrong' what value will that buyer see in your 'project'?

Suggest leave it as is, enjoy the home, dress it up some, don't over do for the area #most important# and sell when the market rises... keep in mind if the market is dropping nothing you do will stop it... if the market is rising nothing #outside of demolishing# will stop it...

Hope this helps...

---------- FOLLOW-UP ----------

QUESTION: Hi Connie,

Thank-you for the insight. It was certainly helpful. I'd like to include some follow-up information that may help you see my options more clearly. First, I would be utilizing an FHA 203k refi to pay for the home addition(s). As to the costs of each addition: master suite with bath=$37,500, just full master bath=$12,000, and enclosed patio=$8,600. I agree with you on doing the additions more for our enjoyment of the home and not necessarily for the next buyer. I obviously would like to do an addition though that might make the home more marketable when the time comes. My feeling is to just do the master bath as this is what my wife and I really want. The enclosed patio is something I have always wanted, and I do feel it would add an extra "room" to our smaller home. However, I'm not sure if the expense would be justified. Let me know if any of this changes your opinion at all and thanks again.

Answer
So now you are borrowing money to make an addition? Keep in mind borrowed money is typically repaid (just to calculate quickly) at 3x's the principle

$100= $300 on 30 yr term

Add 10% - 15% to your proposed cost (their are always over runs especially on older home remodel)

on the more marketable angle..... although you will always get less on a two bed room, during the boom market 2 beds sold very rapid as many people could not afford the 3/2 and they have always had the 'dream' of adding on... I see and hear it all the time... 2-5% actually accomplish this feat...

Your best bet is the enclosed patio, make it into a real living space, with heat and a/c good insulation, flooring and make it 'Livable' living space...

Hope this helped...

But also ... if you are going to live there 10-15 years...do the one you want most... you might as well get the full enjoyment out of the project... what ever project you pick...

PS...sometimes just getting that home over the 1,000 sq foot mark can really help in resale also...

pull comps and see what happens... Good luck