We are looking to flip a single family home in Livermore, CA It is currently a 2/1 rental property. We have the opportunity to add a 3rd bedroom, but don't know how to determine the valueadd to potential investor. As a 2/1, the property currently rents for $1450. The post reno rent would be $1800 (as a 2/1). As a 3/1, the rent should jump to $2200-$2300. Is there a rule of thumb/formula for calculating what the additional bedroom will add to the sale price?
I would look at the area's comps. I can tell you every market is different. In our market 3bedroom starts at $1400 and a 4 bedroom starts at $1600 just based on watching the house prices. We don't have 2 bedrooms in the neighborhoods I look at. Are you adding square foot or just "rooms". Make sure you look at that too.
@Debbie Olsen I am curious why are you looking to market a single family flip to an investor? If your target is to flip property to investor he/she will be looking to make there money going in, this means they will want to buy at a discount. Just because the property you are buying is currently a rental property does not mean you should keep a rental property by marketing it for an investor. I suggest you find the ARV and sell to a homeowner at fair market value, creating win/win for all parties and increasing your profit.
Thanks Elizabeth. We are always looking at comps. We'd be adding square footage by enclosing a breezeway; then we need to redo the floor plan.
Shawn, We're looking at marketing the property to homebuyers as well as investors. The market has slowed down, so we'll make a lowball offer and see what happens.
In general, a 3 BDRM is WAAAAAAAAAY more marketable and attractive to buyers than a 2 BDRM. If you can make the numbers work, I bet you'll get great ROI from the addition.
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