Home renovations can be expensive and picking the right home improvement project is crucial in order to achieve the maximum added value for your property. Some additions give you a higher return on investment, or ROI, than others when you sell your home. In most cases, an extra bath and bedroom will add substantial value to your home, depending on a variety of local factors.
Adding Bathrooms and Bedrooms
For 2021, the national average cost in the United States for mid-range, upscale and upscale master suite bathroom additions were $56,946, $103,613 and $320,976, respectively, according to Remodeling magazine. These additions increased the sale price of a home by $30,237, $54,701 and $152,996, respectively.
Real estate website Opendoor found adding a bedroom increased home sale prices by $20,000 in 2019, while converting existing square footage into a bedroom added $14,000 in value. According to Clever.com, you'll add between $30,000 and $50,000 for each bedroom you add to a house.
Any national estimate is just that – the state of the real estate market, the school district the house is in, whether it's a small starter home or McMansion and myriad other factors will affect the price of any house that's being upgraded. This is why it's best to meet with a realtor who can run area comps and estimate what a house will appraise for in a specific area.
Consider Neighborhood Factors
Consider the other houses in your neighborhood before deciding how much value an extra bath and bedroom could add to your home. Overbuilding for the neighborhood could be an expensive venture that is not likely to pay off in the end. On the other hand, if your home has two bedrooms and one bath, and many houses in the area are three-bedroom, two-bath homes, adding an extra bath and bedroom could significantly increase your home’s value.
If you plan to sell your home in the near future, you may want to consider smaller, less expensive home improvements because there is no guarantee that you'll achieve a worthwhile return on your investment.
Controlling Your Costs
Spending $40,000 to add an extra bath or convert attic space into a bedroom does not mean you will get $40,000 back when you sell the house. If your house is already comparable to other properties in your neighborhood, a modest makeover of the entire home could save you money and pay off better than a bigger-budget project on one or two rooms. Especially if you plan to move in the next year or two, save the money to put into your new home, and complete a few less-expensive enhancements instead.
Home staging experts recommend spending a more modest amount – $5,000 to $10,000 – for fresh paint, new carpet, updated fixtures, doors and windows, curb appeal and other general improvements that attract buyers.
Don't Overprice Your Home
When you consider to what extent you want to go with your home improvement project, it is best to follow the 15 percent rule. Know your home’s value, and do not spend more than 15 percent of that on any one project. Some beneficial projects with the best ROI include interior/exterior paint, kitchen remodeling and adding a deck.
Working with a local realtor, you can find out in advance if your addition will put your sale price way out of line with other comps in the area, which could affect a house appraisal value, and therefore, a bank's willingness to issue a mortgage.
Based in California, Debbie Donner is a freelance online writer who primarily writes articles related to personal finance. Donner received a Mensa scholarship in 2006 while attending California State University, Fresno. She holds a Bachelor of Arts degree in liberal arts and a multiple-subject teaching credential.