How Much Does Adding a Bedroom Increase Home Value?

One additional bedroom can make all the difference if you need extra space in your home. You might use an add-on for additional privacy or turn it into a home office.  If you need the added space, the cost and time involved in renovating your home may be worthwhile considering that you may recoup 53% to 75% of the costs.

To help you understand how much a bedroom addition might add to the value of your home, we spoke with the experts: top-selling real estate agent Lily Moore, of Fort Worth, Texas; appraisers Mason Spurgeon of Missouri, and Diana Benson of Arizona, and Mark Poulton of TraVek, a design-builder in the Phoenix area.

“The number of bedrooms has a great impact on the sales price for smaller homes if your bedroom addition adds square footage,” advises Moore. That’s a good chunk of change! However, determining the added value for your specific project requires digging into the specifics, including:

• how the new bedroom impacts your home’s layout
• whether the new bedroom adds square footage
• how many bedrooms are common in the homes in your neighborhood
• what local buyers are looking for

Let’s explore why these factors matter and how to account for the value-add of a bedroom in your market before you embark on this project.

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What qualifies as a bedroom?

An additional bedroom will bring the most value to your home if it qualifies as a bedroom according to state building code requirements, appraisal regulations, and the real estate definitions for listing purposes. For a room to legally qualify as a bedroom, it typically must have lighting, a closet, and a window that allows ventilation and escape in the event of a fire. In most states, a bedroom must have at least 70 square feet of floor space.

What are my options for a bedroom addition?

Homeowners have three options to consider when adding an extra bedroom to their house: convert existing space, build an addition on your ground floor, expand or add a second story.

1. Convert an existing space

If you already have the space for another bedroom in your existing square footage, you may get more bang for your buck if you convert space in your basement, garage, or attic. It’s relatively inexpensive to renovate the existing space, yet you’ll still pull in extra money for the additional bedroom as long as the converted space legally qualifies as a bedroom.

2. Build on a ground-floor addition

Most homeowners envision building out on the ground floor when they consider adding a bedroom addition to their home. This option is appealing because it’s not just reconfiguring your existing space, it’s adding square footage — and more square footage typically equals added home value.

However, when you add a bedroom addition onto your ground floor, the added square footage has to come from somewhere. Consider:

Bedroom space is more valuable than yard space. Before you consider building a bedroom addition on your ground floor, you need to assess how the addition will impact your yard size. Vacant land tends to be priced less than improved or livable areas. For this reason, it can be worthwhile to sacrifice some of your outdoor space to expand your home’s square footage.

However, small yards can hurt marketability. If your property is all house and no yard, it can be harder to sell. And houses that sit on the market for too long typically sell for less when they finally find a buyer. A yard that’s large enough to expand your home’s square footage might help you get around 53% ROI from your addition. But if your yard is already small, you might hurt your resale price if you make it smaller. Most buyers are looking for a home that has space to relax and play outdoors.

3. Add a second story

Single-story homeowners don’t always think of expanding upward when they consider adding on a bedroom, and there’s a good reason for this. Adding a second story is a major undertaking in terms of time, cost, and commitment.

While adding or expanding your second story is expensive and inconvenient, there is a silver lining. This option lets you expand your home’s square footage without reducing your yard size, which may pay off when you’re ready to sell.

What’s the typical cost to add a bedroom?

The three main options to add a bedroom to your home come with very different price tags.

Cost to convert existing space: $2,800 – $34,000

Converting existing space is a cost-effective way to add value with a bedroom addition. The cost to convert an existing space into a bedroom all depends on its current condition and location. For example, a space that is finished, with existing electrical and a window egress, will cost less to renovate than an unfinished space that may require building out walls, installing ceilings, flooring, and a window. Adding insulation, wiring for electricity and lighting, and rerouting HVAC to accommodate a bedroom will add to the cost.

Here are two common options to convert existing space in order to add a bedroom:

Dividing a room: $5,251 – $13,793

One of the most cost-effective ways to add value with an additional bedroom is to divide a bonus room. This means that you’ll be using finished space and installing a non-load-bearing wall, perhaps additional electricity, a closet, and a window.

Breakdown of average costs to divide a room

Converting unfinished space: $2,800 – $34,000

The cost goes up if you’re adding a bedroom to a space that’s currently unfinished, such as a basement, attic, or garage. When you convert unfinished space, you can capitalize on the increased value by keeping the aesthetics of the renovation consistent with the rest of the home. You’ll also want to ensure that the space is easily accessed through a finished space of the home. If your basement entry is in the garage or the attic entry is a pull-down ladder, the conversion will not add livable square footage to your home space.

Average costs to convert unfinished space by location

Cost to add a ground floor bedroom addition: $22,500 – $62,500

According to Poulton, a  basic bedroom build costs between $100 to $200 per square foot. When calculating the cost for your bedroom addition, keep in mind that the cost goes down as size goes up. However, your cost for a ground floor bedroom addition goes up if the ground requires additional filling or grading or if you add a bathroom. An ensuite addition starts at $300 per square foot.

Cost to add a second-story bedroom: $90,000 – $200,000

Many homeowners experience sticker shock when they look into adding a second story to their home, which can cost almost as much as a second home. If, however, you’re considering building up because your yard or home layout won’t accommodate a ground-floor addition, you’ll pay around $300 to $500 per square foot. The cost of adding an upstairs is so high because your walls and foundation must be reinforced to support the weight of a second-story addition. You’ll also pay for a new roof unless you have your roof lifted.

How does an extra bedroom affect my home’s value?

There are three ways of looking at the value that an additional bedroom adds to your home: increase in list price, higher appraisal, and how much of the cost you recoup.

Most sellers think of adding value in terms of how much a bedroom addition might increase the listing price of their home. But when it comes time for your home sale to close, what matters most is the market value that’s determined by the appraisal.

However, the appraisal value isn’t necessarily the amount you get out of a future sale. In the long run, how much your bedroom addition adds value depends on the amount you spend and the final purchase price.

1. List price

When determining how much to list a house for, sellers may want to roll the construction costs into their asking price. In truth, how much of those expenses a seller can add to the list price depends largely on what’s going on in the local real estate market, and what the buyer demand is for properties with a similar number of bedrooms.

“In the Dallas market, two-bedroom, one-bath homes aren’t popular. Most buyers are looking for three or four bedrooms now that so many people are working from home,” explains Moore.

In Moore’s Dallas market, the average price per square foot is about $188. The average bedroom size is 132 square feet. This means that adding a bedroom that increases the size of the home in the Dallas market could help a home fetch an additional $24,800.

But that’s not the case for every area. You’ll need to account for your local housing market before you can make that calculation.

2. Appraisal

According to Benson,  if you increase a home’s area and bedroom count it will add desirability — and increase your home value — in a location where you are one of the smaller homes. This is especially true if you only have one or two bedrooms.

Both agents and appraisers are going to start their valuation process with recent sale prices of similar homes in the neighborhood. They’ll look at square footage and bedroom counts.

For appraisers, it’s not the number of bedrooms that matters, but the amount of square footage that impacts a home’s value. While this does vary from market to market, typically a bedroom addition adds appraisal value only if it increases the square footage.

3. Return on investment (ROI)

ROI is the amount you can anticipate recouping from an investment. A homeowner almost never recoups 100% of the cost of a bedroom addition. ROI on a bedroom addition is 53% to 75%, depending on the location of the addition, construction costs, and the quality of materials that go into the remodel.

How much you recoup when you sell your home depends on how the square footage and layout of the home were changed and the recent sale prices of similar-sized homes in your area. Your actual ROI depends on the final purchase price.

For example, if you spend $50,000 to add a fourth bedroom to your $250,000 home, a 53% ROI means you might be able to get $276,000 for your home, recouping $26,500 of the construction costs. However, if similar 4-bedroom homes in your neighborhood are selling for $265,000, you can plan to recoup $15,000 of the $50,000 you spent, a 30% ROI.

How to maximize the value of a bedroom addition

To get the best return from your construction investment, plan your addition to ensure:

Your bedroom has adequate space. A bedroom must have enough space to add desirability to your home. “I’ve seen people add bedrooms in very small places that barely have room for a bed and no space for a closet. Those spaces may technically be usable as a bedroom, but they cannot be listed as a bedroom and they won’t be counted as a bedroom by the appraiser,” states Moore.

Renovation doesn’t affect valuable space. One of the fastest ways to diminish the return on your renovation is to eliminate a parking space, a garage, a covered patio, or an area of the yard, especially if the yard is already small.

The location makes sense. To get the best return from your renovation, your new bedroom must be in a location that makes sense. Inconvenient access can detract from the appeal of your addition. If the only available spot for your bedroom addition is right off the kitchen, or if it can only be accessed through another bedroom, the amount you’ll be able to recoup will be diminished.

Keep the aesthetics consistent. The look and feel of your added space should be in keeping with the rest of the home, both inside and out. “When an addition has a different feel to the rest of the home, the market reacts with a smaller amount paid for the added space,” says Benson.

Avoid over improving.  If you’re hoping to increase your home value with another bedroom, you need to take care that you don’t over improve your home in comparison to other local homes. Sometimes, a bedroom addition doesn’t make sense. For example, you might not recoup any of the cost if you tack a bedroom onto a home that’s already large for the market. “Any time you go above and beyond what is typical for a neighborhood, there is the risk of over improving the home. Most buyers are unwilling to pay for over improvements,” explains Spurgeon.

Will an extra bedroom help bring in more buyers?

Not all added value can be calculated in dollars and cents. In some cases, another bedroom may be just what you need to bring your house in line with the competition, especially in the pandemic age when so many people and their kids are working and attending school from home.

An extra bedroom stands out if you’re the only four-bedroom house in a three-bedroom community, and will likely net you a few grand more than your three-bedroom neighbors. But that doesn’t mean you should go throwing up walls to create as many extra bedrooms as you can.

Is adding a bedroom a good investment?

An investment isn’t always just about money and financial ROI. Adding another bedroom can be a big benefit to your family’s needs in the short term, and it could pay off down the road when you’re ready to sell your home. If a bedroom addition will increase your home value — and by how much — depends on your local market and your home.

Sometimes it’s a good financial investment, and sometimes the value can be measured in other ways. It’s wise to get a professional opinion before you take any action so you don’t inadvertently reduce your home’s value.

Speak to a top agent about your home’s value

The best way to really tell if a bedroom addition will increase your home value is to get an opinion from a top real estate agent, even if you’re not planning to sell.

“Real estate professionals are always available to tell you if it’s worth it to add a bedroom to your home. I get those calls on a weekly basis from homeowners, and there’s no charge for that,” says Moore.

HomeLight’s Agent Match platform can connect you with a top-performing, experienced real estate agent in your area. This free tool analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.

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