You need to run the numbers. This question is too broad to answer in generalities.
are you going from 1 to 2, 1.5 to 2.5, or 2 to 3 baths?
Lets' assume you are talking about going from 2 baths to 3. You need to ask yourself some questions...
How much more are 3 baths selling for vs. 2 baths in the specific neighborhood? If a 3 bath goes for 20K more, that is your answer.
How much will it cost for the additional bath? If it costs more than the added value, I say don't do it.
As far as converting an attic to a bedroom. That is also a case by case, question. I don't know enough to answer, but would ask a GC to spec it out for you.
This is a great exercise in running comps. You'll get your answers for both bedrooms AND bathrooms. Know where to put your money on flips and you'll be a much happier investor.
Also, check out various publications on value adds:
is it worth just popping in a bathroom when ever possible?
someone wants to convert a walk in attic into a bedroom but i do not think it is do able..
If it's short on a bathroom, I would consider it (example: 4 bedroom/1 bathroom OR 5 bedroom/1 bathroom). Otherwise do not. Do not add a bathroom when it is not clearly needed. It is unlikely that the numbers will justify it.
If it has sufficient bathrooms and the design is such that you can add a bedroom at lower cost, it's worth evaluating. That said, it is unlikely that the payback will be worth it.
@Danny WoodsonI come across this dilemma sometimes myself. I agree with everyone above ... you just have to run the numbers and look at the comps to see if it makes sense.
I know for me and in my area a lot depends on the neighborhood. There is a project I'm working on right now in an area that sales at over $200 a sq ft ... and it only has a 1.5 bath so by adding a master bedroom and bath which will help sale my house faster and increase my profit margin.
Now in most neighborhoods this isn't the case. Recently finished a 3 bed 1 bath in a mediocre neighborhood and it just didn't make any sense to add to it. These are just some examples. I hope that helps but really the only way to know is by running the comps. Good Luck friend!
We added a bathroom to a 4/2 house. Now 4/3. Moved a laundry room to a stackable laundry in a coat closet. Got permits and licensed contractors for the job. With new bathroom, widening one bathroom door, upgrading a toilet in master, granite on kitchen island (had ugly tile), hardwood flooring, upgrading lighting in dining and kitchen to can LED lights and paint, we spent about $19K in upgrades. Paid a premium for the house at $211K in a very nice neighborhood (bidding war). House is currently valued (after 1 year) at $240K.
Going in, it wasn't a fix and flip property, but a home for my father-in-law with alzheimer's and a live in nurse. We decided to lease the property to a care home agency who has 3 residents in the home now covering the costs. So we paid cash for the house and the updates which earns $2,000 monthly in rent - $350 in expenses (taxes/insurance/home warranty) which net's us about 8.6% on our investment. Better than a CD or Fund. And we have an appreciating asset now.
So, was adding a 3rd bathroom a wise investment, not for a short term flip but for passive income yes as leasing the home to a care home organization commands higher rents than for single family (could only rent to single family for $1,600 monthly).
Lesson learned: If purchasing a home to make money, know your options and ways out. In my case, I knew that home appreciation was at a good pace but also knew that I could rent to a care home organization if appreciation wasn't strong enough in the short term.