The Costs of Adding Rooms to Your House
Home is where the heart is, or, as this past year has taught us, where you may just end up spending pretty much all of your time trying to elude a pandemic.
Since the onset of the pandemic in March 2020, Americans have done just about everything from their respective domiciles, be it shopping, working, exercising, homeschooling, etc. Through it all, many have felt that they need more space, with some families setting up fort in new “pandemic destination cities“, where you can get more square footage for less. Others are moving out of apartments and into single-family homes (a contributing factor to the housing market boom). And others yet are renovating their residences by changing up the decor, or if they’re really up for a challenge, adding rooms onto their property.
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It sounds like it should be pretty simple: You have this existing property, and now you’d like to build on it by adding a sunroom, a back house, or a second bathroom…the list goes on. So too does the pricing. Adding on a room is one of the most expensive endeavors you can embark on; it’s also incredibly complicated, and there’s no one-size-fits-all cost — though there is a rather alarming average.
Expect to pay an average of $42,000
“The average cost to build an addition [to your house] is $42,000,” said Mark Washburn, realtor, Naples Condo Boutique.
But the cost really depends on where you live and what you want to do.
Which Should You Update First in Your House: Kitchen or Bathroom?
“The cost to add a room to your home varies based on where your home is located,” said Carlos Garcia, general manager and broker, New Western San Antonio. “In my market, adding a 400-500 square foot room to your home can cost anywhere from $130-$170 per square foot. Of course, with the cost of materials and labor going up, that figure can change quickly. Room size, materials, labor, location, and whether you’re building up or out, all of these things will affect the cost.”
Bear in mind that the cost of materials also plays a major role in the cost of an add-on renovation, and, as Nathan Garrett, a real estate agent and owner of Garretts Realty, underscores, the cost of materials is extremely high right now.
Don’t Forget The Zoning Laws
Your vision of adding a room might be radically altered when you consider your area’s zoning laws and regulations.
“For residential homes, adding rooms consistent with the height, use, and bulk restrictions of the zoning law, you can renovate. But if you go beyond the maximum height, width or added a room with a different function (ex: you added a room that you turned to a store), you need approval for a variance,” said Christopher McGuire, founder of Real Estate Exam Ninja. “A variance will usually involve professional services (lawyer, architect, engineer) allotment of time and effort to help you prove to the municipality that the variance is necessary. Variance is usually granted if the addition is about general welfare, public health, and safety promotion, improving access to adequate light and space. As long as the expansion does not negatively impact the surrounding neighbors, it will be granted.”
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As far as zoning laws and fees are concerned, guest houses are the most complex add-ons, typically.
“Additions with plumbing will be more expensive, and you also need to consider the uses for the addition in order to make sure everything is up to code and you have the proper permits,” said Michele Harrington, COO, FirstTeam Real Estate. “If you’re hoping to build a separate guest house, you’ll need to comply with local code requirements for ADUs (Accessory Dwelling Units). If you want to use it as a rental unit, you’ll need to verify that your community is zoned for multi-unit housing.”
Your Home Will Be Worth More — And So Your Property Taxes Bill Will Be Higher
Depending on the flow and quality of your renovation, you can expect a fairly significant return on your investment (ROI) when you sell the house. But again, it really depends on the space — and the place.
“The average ROI for a kitchen remodel/extension is between 77% to 80% unless the space planning does not make sense,” said Fatima Malik, global real estate agent. “Every situation is different so I walk through all of this with the homeowner from a designer and realtor perspective. From a design perspective, I consider the potential of space planning in terms of flow, balance, how it sits on the lot, what is missing? Does the kitchen need to be bigger? Is a main bedroom suite needed? Are there only 3 bedrooms in a neighborhood where 4 bedrooms are most desired? I then analyze the other properties in the neighborhood with a comparative market analysis.”
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Malik adds that you should consider the price points in your neighborhood” “You don’t want a $6 million home in a $2 million neighborhood.”
Also note that when your home value goes up, so too do your property taxes.
“Your property tax increases as your home value increases,” said McGuire. “You must consider your purpose of the room addition and your financial health after the expansion if you want to be cost-wise with your home expansion.”
If You’re Going To Add A Room, Do It Strategically
The bottom line is that if you have the means (and permission) to add a room to your home and want to proceed, make sure you’re strategic. This is important should you ever want (or need) to sell your home.
“If you are adding rooms with the primary intention of boosting the value of your home, it’s key to understand what your market wants. This will vary from location to location,” said Vlodymyr Barabakh, co-founder and project director, BI International Builders. “For example, in areas popular among young people on high incomes, basements are especially in demand. A basement large enough to fit a home gym or games area can add an extra $30,000 to a property’s value.
“Additional bedrooms are your best bet in areas popular among families,” continued Barabakh. “Additional bathrooms bring the most value if you are planning on renting out a property, given the additional privacy it can give to tenants. You can demand 10% higher monthly rent with each extra bathroom.”
Ultimately, you’ll need to do a heavy amount of research to make sure this is the right decision for you and your financial end goal. Some sellers do live to regret it.
“When I flipped a house in 2017, I decided to add another room, thinking that it would add a lot of value to the property,” said Tony Martins, founder, Profitable Venture.com. “I was wrong. The types of buyers who were looking to purchase in the area were much younger couples and did not need that extra space. The value that extra room added also put it out of most buyers’ price ranges in the area, and made it very difficult to sell. I ended up having to drop the price and actually lost money on adding the extra room. Essentially, you need to do research into the area and the market when deciding to add the extra room. If you’re in an area with lots of families or people who can afford the extra value, then it’s a great addition. But if not, you might just be throwing away money.”
It Could Be Better To Wait Until 2022
“My advice would be to wait until at least 2022 to see if the market has cooled off because the cost of materials right now is up over 900% on certain supplies,” said Andrew Ragusa, CEO of REMI Realty in Long Island, NY. “Lumber used to sell for $40 per every thousand square feet. It’s now over $1,500 per every thousand square feet. The same can be said for marble tile, all construction materials. A simple $40 supply of electrical wiring cables is now selling for $90 for the same quantity. Unless it’s absolutely necessary it would probably be a better idea to wait until next year.”
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Last updated: May 26, 2021