The case for room additions
At the beginning of the Covid-19 pandemic, many of us made do with a laptop on the kitchen table. But with one in four Americans now working remotely long-term, the homes of the future need a dedicated space with the appropriate cabling, connectivity and other functionality. Likewise, if we’re spending more time at home, there’s a stronger case for adding an extra bedroom: either to give everyone more breathing room or to provide accommodation for visiting friends and family.
With more of us working from home, there is a growing need for home offices that are separate from family areas. And with housing demand at record levels in some areas — particularly Texas — adding an extra bedroom, for example, to an existing home might seem more affordable (and certainly easier) than moving to a bigger property. Find out when it pays to invest in a room addition, and when it might be better to hold out for your dream home in the listings.
The economics seem sound at first glance. An extra bedroom will typically add 15 percent to the resale value of a house. However, that may not necessarily cover the initial cost of a room addition.
How much does a room addition cost?
Once we’re talking about an actual room addition (i.e. increasing square footage) as opposed to converting existing space, it becomes a project that comes with the costs of architects, contractors, materials, permits, insurance and extra wiring and plumbing. Prices vary significantly by area, but you can expect to pay up to $350 per square foot to add a room, with the average cost of a single bedroom addition just shy of $50,000. Generally, the more rooms the house has to begin with, the more it will cost to add each extra room. Home offices aren’t much cheaper, and a dedicated office space can cost $30,000.
Will I get a return on my investment?
If the goal is purely to increase resale value, it might be worth targeting the features that homebuyers are looking for first before spending anything up to six figures on a room addition. Clearly, adding an extra bedroom will move your home to a higher listing-price bracket, but on average you will recoup two-thirds of the cost at sale, at best.
When it makes sense
If you’re planning to stay in the home for a few more years and you will actually benefit from the additional space, it may be a good time to upgrade if and while interest rates for home equity loans are relatively low.
When to pass
Adding an office or room can mean several months of disruption, dust, plaster and contractors to contend with. Given that the ROI can be as low as 50 percent for an extra bedroom, that’s a less attractive proposition if the purpose is just to upgrade and sell. The more elaborate the addition, the worse the return. A large master suite addition can cost $150K, and is unlikely to recoup the cost. To calculate the expected return on a bedroom addition, look at the average house prices in your neighborhood for similar properties.
Alternatives to adding rooms
Given that beyond the construction costs, a room addition will incur extra heating/cooling and insurance costs in the future, a more affordable option might be to convert a space you have already. Garages are the obvious candidates, while dropping a prefabricated room onto available yard space is also a less-disruptive option. Ultimately, however, the most prudent solution from a financial perspective might be to cash in on your current home value while the seller’s market is at its strongest and move to a bigger home in a more affordable area.
Need to know where to find your upgrade home? Our professional agents have their fingers on the pulse of the up-and-coming areas in North Texas that offer the best value.