While it’s tempting to think that you’ll add significant value to a home by simply adding two bedrooms to a three bedroom home, it’s a little more complicated than that. Not every bedroom addition is created equal.
One of the primary reasons people buy houses is to have more space. But how much space is enough, not enough, and too much? Your family will have to make that decision for yourselves, but there is a financial element to consider as well.
Whether you’re in the market to buy a home or you’re considering adding some space to your current home, an extra bedroom can make a big difference in resale value. Even if you’re not actively using the bedroom as sleeping quarters, it may be valuable as a home office, gym, or multipurpose space.
First off, let’s clarify what a bedroom actually is — because not just any room in a house qualifies as a bedroom. Different states have different building code requirements, appraisal regulations, and real estate definitions for what makes a bedroom.
Generally speaking, however, to legally qualify as a bedroom, a room must have:
Most states also require a room to be at least 70 square feet to qualify as a bedroom.
The cost to add a bedroom ranges depending on your home’s specific situation. Converting an existing space (like a bonus room or office) into a bedroom could cost as little as $2,800 according to HomeLight, but could range up to $34,000 if you need to renovate an unfinished space, like a basement or attic. It can also be on the more affordable side to divide an existing room into multiple.
If you’re planning to add a room by expanding the house in general, which may necessitate extending the roof and foundations, the cost can quickly rise up to $22,500 to about $200,000 depending on the level of finishing needed, what sort of engineering is required to make the space habitable, and the quality of materials used.
That said, adding a bedroom has a fairly strong record of recouping the cost of your investment, with a 53% to 75% ROI on average. That means if you spent $25,000 on a project, you may expect to get an extra $13,250 or more on your home sale when you go to market.
Adding a bedroom to your home has a good ROI on average compared to other home improvement projects as we mentioned before. There are several factors that may impact just how much value you recoup, including:
Presuming that a bedroom doesn’t produce any negative impact, experts estimate that adding a new bedroom to a property can add as much as 15% to the home’s resale value. Another way to put it is that for each bedroom you add, you could expect to increase property value by as much as $30,000 to $50,000.
While homes with more bedrooms tend to be worth more, there’s a fine line that you have to walk when it comes to adding bedrooms to your home. Wade Williams, a licensed Orchard real estate agent in Austin, Texas, points out that having more bedrooms doesn't necessarily lead to a higher price. In homes of similar size, if the additional bedroom is equal in size to the others (meaning they would be bigger if there were one less of them) it can actually have a detrimental impact on the property's value.
If you’re turning a 3-bedroom house into a 5-bedroom house in an area where all of the houses are three bedrooms, you’re making it exceedingly difficult for home appraisers and real estate agents to find comparable homes to accurately price your home. the home’s market value is dependent on a comparative market analysis that looks at the recent sale prices of comparable properties in the area. If there aren’t any, it’s easy to go to market with too high of a list price, which can hurt your home’s value if you don’t find a buyer quickly.
In some real estate markets, a well-maintained, three-bedroom home can have excellent resale value, especially if it's in a desirable neighborhood with good schools and amenities. case, “three spacious, functional bedrooms are better than four small bedrooms that can't fit typical bedroom furniture,” according to Grayson Bannister, a licensed Orchard real estate agent based in Houston, Texas.
He says one scenario where it could be worth adding a bedroom is if you have a large open space that doesn't have a clear function — and can easily be enclosed and converted into a bedroom.
While a four-bedroom house generally commands a higher listing price than a three-bedroom house, the added value of another bedroom isn’t quite as high. According to Williams, “The only case I could see a fifth bedroom adding any value would be if five beds were the norm in the area and adding the additional bedroom would not impact the size and usefulness of the other rooms in the house.”
Ultimately, the resale value of a three-bedroom versus a four-bedroom versus a five bedroom home depends on various factors, including the local real estate market, neighborhood desirability, and the specific needs of potential buyers.
Location plays a significant role in how much value you can get per extra bedroom, to the point that adding a bedroom may not be worth the cost if it will make the home substantially different from other homes in the neighborhood.
It’s no secret that different parts of the US have wildly different housing prices. The average cost of 3-bedroom homes alone range from $150,000 in some parts of the country to roughly $900,000 in others. Naturally, 4-bedroom and 5-bedroom homes cost even more and can have even wider median price ranges.
Likewise, there’s a reason why neighborhoods often look fairly homogenous. They’re built and designed for people of certain income levels and appeal to buyers in similar tax brackets. While somebody might want to buy the biggest house in the neighborhood, the average buyer would more likely look in a neighborhood with more comparable homes.
Between higher maintenance costs and potential difficulty reselling the home for what you believe it’s worth, there’s a sweet spot for the right number of bedrooms in your home. That number is significantly impacted by what the norm is in your immediate neighborhood.
Adding a bedroom to your home is generally a smart financial decision. Bedrooms tend to have good ROI as a home improvement project and can add significant resale value to your home. But as with all things in real estate, it’s not always cut and dry. If you’re adding an extra bedroom to your home, make sure that it fits within the overall aesthetic of your home and doesn’t make the home substantially different from the other homes in your neighborhood.
Here are more details about the added value of an extra bedroom.
Several factors can affect the added value of an extra bedroom, including the location of your home, its condition, and the local real estate market. Additionally, the demand for larger homes and the specific needs of potential buyers in your area play a significant role.
While it varies by location, a general rule of thumb is that an extra bedroom can increase the resale value of your home by 15% to 20%, on average. However, the exact amount can differ based on individual circumstances and the features and conditions of the house overall.
Generally, yes. A 4-bedroom home tends to have a higher resale value than a 3-bedroom home due to its broader appeal, catering to larger families and individuals needing extra space. But market conditions and location also influence this difference
Besides bedroom count, consider the size and layout of the bedrooms, the presence of other amenities, like the number of half bathrooms, and the overall condition and curb appeal of your property. These elements contribute to your home's marketability.
Converting a spare room into a functional bedroom can potentially boost your home's value, which will be affected by the quality of construction, materials, and finishes, so you may not recoup as much depending on how much money you put into it. If you’re adding an extra room, make sure the extra bedroom complies with local building codes and standards and offers the features that buyers typically seek in a bedroom.
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