Add a 2nd Bathroom or not?

Question

I currently have a 3/1, approximately 1300 square foot under contract.  The house has a second living area, that is a former garage converted to a family room.  I am looking at approximately 3500 to add a second bathroom making the house a 4/2.  My property manager says that the house would rent for $825-875 as is, but could go as high as $950-$1000 as a 4/2. So the difference is about $100 per month in cash flow.  At those numbers it will take about three years for the improvement to pay for itself.  Thoughts?

Corby Goade · Answer

Not only does the second bathroom add value- it's likely to significantly decrease your vacancy. I see 3/1 SFH sit much longer, waiting for a tenant than a 3/2 does. If you can afford it AND it doesn't make your layout too funky, yes, you should. Put extra thought in to the layout though- at 1300sf and a converted garage, chances are you'll have to be creative with how it's done, and if the layout isn't done well, it could be a liability and decrease the value of your property.

Nathan Gesner · Answer

If you could afford it, I would make the improvement. A second bathroom holds a lot of value.

Bjorn Ahlblad · Answer

I would make sure the garage conversion was permitted. Do you have a quote from a reputable contractor to add the bathroom? If you have the money, or you can get it readily, I would recommend doing it. I think you will find it is more than 100/ month. And a big resale gain.

Gavin Welch · Answer

Damon, ask how much another bath would increase a sale price.  You are correct, it won't be a huge return on the rent but could bring much bigger dollars if you wanted to sell it down the road or BRRRR it and pull some cash out.  Would you spend $3500 if you could get $10K back?

Gavin