Expert: Sue Bernstein - 2/9/2012

Question
I purchased my first home about one year ago. It is a 2 bedroom, 1 bath single family home in a Los Angeles suburb. My wife and I would like to add a second bathroom, not just for our comfort, but also for higher potential resale value. We have been approved for a 203k rehab loan to add the second bathroom and a few additional improvements to the home (new kitchen countertops, new hot water heater, fence repair). This will set us back about $30K on top of our current loan balance of $265K.

I just saw a house in move-in condition just up the street that is a 3+2 listed at $290K. My question really boils down to this: should we do the addition of the second bathroom and other improvements or not? Should we just leave the house as-is and wait for the market to come back around a bit more until we can sell? Or do we sell our home now and try to buy something that already has the number of bedrooms and baths we want? I am really torn on what to do. Obviously, it is difficult to predict what the real estate market will look like in the coming years, but we would be staying in our current home no longer than 5 years from now.

What do you think our best bet is?

Answer
Hi Michael,

If you only bought your home about a year ago it is unlikely that you can sell it now and, taking into considerations the costs of buying and selling a home, it is unlikely that you can even break even.
The market will improve at some point and hopefully it should improve before your 5 year timeline. If you like your house and wish to live there in the foreseeable future my recommendation is to do the improvements and enjoy your home.  Besides being an investment real estate is also your home. These improvements should certainly add value and marketability to your home.
Hope this helps.

Sue Bernstein
Rodeo Realty
www.suebernstein.com
818 613-2468