A Home Addition Contractor’s Perspective on Cost v. Value

As an established home addition contractor, we talk with many clients who ask us what type of addition will give them the biggest payback. To provide the answer, we need to ask a question of our own: “What type of payback do you mean – resale or lifestyle?”

If you’re thinking in terms of resale value, sources in the home addition contractor business say some types of home additions do seem to recoup more of the initial investment than others. For example, Remodeling magazine’s latest Cost v. Value Report* documents that – on average – a two-story addition seems to offer the biggest payback at resale. Master suite additions and family room additions are virtually tied in second place, followed by bathroom additions and then sun room additions.

Remember, however, that local housing prices and the demographics are the most important factors in determining which type of addition will make the most sense purely in terms of resale. As a home addition contractor in this area, for example, we see variation literally neighborhood to neighborhood. In pockets of the community popular with older couples who are downsizing, a master suite addition might bring a higher resale ROI than a two-story addition. The sooner you may be putting your home on the market, the more weight you’ll want to give to the resale value of your addition.

Still, how many of us are thinking purely about resale when we consider a home addition? Contractors like us get calls mostly for other reasons, such as a growing family needing more living space, bedrooms or bathrooms.

If you’re thinking in terms of lifestyle value, the home addition that will give you the greatest ROI is the one that solves the real issues triggering your need for more space. For example, two families might say they need more space. But for one family, the need is actually for more private space, while the other family needs more space for being together and entertaining. So, for one family the highest-ROI solution that a home addition contractor can recommend is a master suite, while the highest-ROI addition for the other home is a spacious new family room.

Both resale and lifestyle should be considered when planning a home addition. We can tell you, however, that the best ROI comes from an addition that is built to meet today’s needs while keeping your home attractive to the likeliest type of family to buy your home down the road.

*SOURCE: Hanley Wood Remodeling cost v. value report 2010-2011 http://www.remodeling.hw.net/2010/costvsvalue/national.aspx
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