Do Home Additions Increase Property Value?

May 4, 2023

Building a new bedroom, kitchen, garage, or second story to your home is certainly a good way of ensuring your current home meets your needs. While these projects may be costly, they can increase property value. Most home addition projects increase property value because the main methods of calculating the value of properties consider square footage. Below are a few things to know about home additions and property value.

How Much Value Do Home Additions Add to Your Property?

All home addition projects bring more value to your home. However, you should mind the costs to enjoy a reasonable ROI. Unlike painting, window treatments, and other minor home improvement projects, home addition is a major undertaking, and the costs can quickly accumulate.

Having to hire professionals is among the many things that drive up home addition costs. For instance, you should hire remodeling contractors if your home addition project involves extending your walls. Even if you intend to DIY the project, you’ll need help from Cascade Concrete sawing and drilling for wall extensions.

It is worth noting that returns from home addition projects vary based on your location, the nature of the addition, and the prevailing real estate market conditions. Most home addition projects also involve changes to plumbing and electrical systems, which can add more costs. For instance, according to the 2021 cost vs. value report:

  • Wood deck addition, which most homeowners prefer, costs an estimated $17,000 and has a 66% ROI.
  • Midrange bathroom addition (6ft by 8ft) costs $57,000, with a 53% expected return on investment.
  • Making a mid-range suite addition costs approximately $157,000 and has an average ROI of 55%. These estimates are based on standard bedroom suites measuring 24 by 16 with tiled bathrooms, a soaker tub, a separate shower, and a carpet.

You can also decide to extend your current rooms instead of building new ones. Typical room extension costs range from $600 to $750 per square foot.

Should You Consider Home Addition Projects?

While personal needs can force you into planning a home addition project, deciding whether this project is worth the costs associated are certainly daunting. You should make a decision to make home additions based on family needs, available financing, and whether you intend to live in the house longer. Below are a few considerations to debate before embarking on a home addition project:

Does it Improve Your Home Too Much?

You should begin by evaluating the impact of the addition project on your property. Ideally, you should evaluate your neighborhood before starting an additional project. Otherwise, you can “over-improve” your home, which makes the upgrades larger and costlier for typical homes in your neighborhood.

For instance, extending your home to 6,000 square feet in a neighborhood with 2,000 square foot homes is over-improving. The same applies to adding an inground pool in a neighborhood where pools are unheard of. Choosing such improvement projects won’t have a significant effect on property value.

Cost vs. Return on Investment

As mentioned, not all home improvement projects, including home additions, will give you a 100% return on investment. This means you won’t recoup the full home addition costs in your property value. Nonetheless, some home renovation projects offer a high return on investment. For instance, wooden deck addition has almost 66% ROI.

Will the Additional Project Increase Property Taxes?

Most homeowners overlook or ignore the effect of home addition projects on property taxes. However, home addition projects can increase your property taxes. Home additions that increase square footage and luxury upgrades, like pool and spa addition, should be assessed by the local government. Inspectors from the local government will adjust your property taxes to match the adjusted value.

Which Home Addition Projects Add Significant Value?

The percentage increase in property value typically depends on your chosen home addition project. The following home additions have significantly higher ROI and increased resale value:

Home Office Addition

Constructing a home office is becoming more valuable, especially as many companies and employees embrace remote work models. Most homeowners convert an extra bedroom or the basement into an office. However, if you don’t have these options, you should think about building one.

Whether you need an exclusive office free from distractions or a working space for your small business, a home office addition is cheaper compared to renting a commercial office. The cost of home office addition varies depending on the nature of the fixtures included and the room size. Regardless, having a functional office boosts property value.

Sunroom Addition

Constructing a sunroom significantly increases property value, even for modest homes. Sunrooms allow plenty of natural light into your home without interfering with your privacy. You can enclose an already existing porch or build off the front entryway to create a sunroom. However, you should choose between a solarium, three, and four-season sunroom.

Garage Addition

If your home doesn’t have a garage currently, building a garage space provides extra storage and workspace. However, you should consider the position of the driveway and whether there’s enough space for a garage addition. Whether you choose a freestanding or attached garage, ensure it blends with your home’s architecture for maximum returns.

Kitchen Addition

There’s no doubt adding kitchen space can increase property value. Kitchens are a deal breaker when selling your home and can lower your property value. Unfortunately, most homes have small and poorly designed kitchens, which doesn’t favor those who like cooking while entertaining guests.

Like other home additions, kitchen additions should be well thought out. You should gather kitchen improvement ideas before embarking on the project. You should also decide whether to replace cabinets and appliances. While these are costly upgrades, forgoing them can hurt the flow of your new kitchen.

Endnote

Home additions are exciting yet overwhelming projects that can increase property value. They are also costly and require professional input. Before embarking on any project, ensure you hire professional remodeling contractors and secure enough financing.

Financing options for home remodeling include home equity loans, cash-out refinance, HELOC, and personal and credit card loans. Note that home addition costs vary depending on the location, size, and type of project.

Carlos Diaz
I believe in making the impossible possible because there’s no fun in giving up. Travel, design, fashion and current trends in the field of industrial construction are topics that I enjoy writing about.

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