Is an Addition to a Home Worthwhile?

Determine if expanding your home makes financial sense for you

By Kaye Morris

Photo by iStockphoto.com

As a homeowner, you sometimes reach a point where you'd love more space, but don't want to move. If you only had an office or a den or a game room, your home would be perfect. The question remains, is the addition worth the cost? Home additions are a costly and often frustrating project, and you need to be completely convinced an addition is the right move for you before making a commitment.

• What You Need to Know
• You may find that gathering the recent sales prices for homes in your neighborhood and square footage of those homes to be useful. A list of features in those homes will help as well. This will help you compare your home in its current state as well as with the improvements you're considering and let you better assess if improvements will raise your home's market value a noticeable amount.

Step 1:

Estimate how long you think you will remain in your home. There is little point to spending a large amount of money and time adding onto a home you intend to sell in a couple of years.

Step 2:

Estimate how much time your family will use the new room. Be honest. If you want to put in an office, but always work in bed with your laptop, then maybe an addition isn't the best option.

Step 3:

Consider your neighborhood. You are always in a better financial position if you own the smallest house on the block. If your home is already one of the largest, then adding a room is unlikely to raise the home's value in a way that is proportionate to the cost. On the flip side, if every home in your neighborhood has three bathrooms and yours has only two, then the addition would bring you in line with the rest of the neighborhood.

Step 4:

Find a reputable contractor and discuss potential improvements to your home. Ask for rough estimates of how much different additions might cost, so you can try to calculate your potential return on investment -- both in terms of resale value and in terms of personal use. Consider if one or multiple remodeling projects fit within your budget.

Step 5:

Calculate a rough increase in value. Get basic estimates of the cost of the addition and talk to a real estate agent or other source to get recent sales prices on homes in your neighborhood of comparable quality to your own. Divide the sales price by the amount of square footage in the homes. This gives you a value per square foot for homes in your neighborhood. Calculate the average value for the neighborhood. Now, take the average value per square foot and multiply it by the amount of square footage the addition will add to your home. Compare the increase in home value to the cost of the addition to help gauge if the addition makes good financial sense.

• Tips & Warnings
• Adding a bathroom often returns the most value for the cost of the addition, according to the National Association of Home Builders.
• If you cannot afford an addition, look for simpler home projects. A fresh coat of paint on the walls and a pressure wash of your home's exterior are some of the most noticeable and inexpensive home improvements you can make.