How Much Does An Extra Bedroom Increase Value?

Question

Attempting to analyze a potential SFR, 3, 2 fix and flip and the margins are thin. Does adding an extra bedroom allow me to compare it to 4,2's and do I want to? Do I just walk away or is there a potential upside allowing for some strategic thinking?

Will Barnard · Answer

There is no one size fits all answer to this question as it is heavily Property and area dependent. What comps do you have for values on 4+2’s vs. 3+2’s? The only way to get any accurate assessment of value for the additional bedroom and additional square footage is a sold comps comparison. I suggest working with your realtor to get those numbers, then make your decision based on that sound due diligence.

Tchaka Owen · Answer

@Joseph Cameron - there's a tendency to think that a 4BR is more valuable than a 3BR, however as @Jaysen Medhurst and @Will Barnard allude, square footage is a factor (IMO, a more important factor). So if you're converting the same space from 3 to 4, you're giving something else up. On the other hand, if you're adding on to the home (ie, making it larger), that's a different situation. Based on the follow-up comments you've made, go simple and stick with a 3BR. Good luck!

Joseph Cameron · Answer

@Jaysen Medhurst yes they are, but oddly the 4,2's are coming in at the same price. There is some optional additions you could make to the property to increase sq ft but I don't think I'm there yet either. Thanks for the help!

Jaysen Medhurst · Answer

Are there 4/2 comps of the same square footage? What do those numbers say? In most markets 3/2s are the sweet spot. Additional beds or baths show diminishing returns. What are the other houses in the neighborhood?

Will Barnard · Answer

Ok, so if your area does not support a higher value for a 4 bed over a 3 for resale value, then I would just go after 3 bedrooms. The only caveat to that would be if the plan now or potentially in the future was to hold as a rental, I would then do the same analysis with my agent to see of rental rates were higher for a 4 bed over a 3. If not, stick with the 3 bedrooms.

My strategy locally is to develop and resale as none of my projects could ever come close to break even let alone cash flow positive so my ONLY strategy is to sell and then drop price until it does. If I was in an area that supported cash flow positive and flip, then I would certainly look at a project that did not work as a flip for a rental if that was part of my overall business strategy. Again, only you can answer that question if it is in your goals and desires.

Joseph Cameron · Answer

@Will Barnard they came in at the same price and there was really only 1 in the area. Question: when you analyze and it doesn't fit your current strategy do you do a reanalysis as a rental etc. To see what does or do you move on?

Joseph Cameron · Answer

@Jaysen Medhurst @Will Barnard Guys this feedback is much appreciated. I am awaiting info from my agent and will circle back as soon as I have.

How Much Does An Extra Bedroom Increase Value?

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