Why Adding a Bedroom and/or a Bathroom is Worth the Effort

Why Adding a Bedroom and/or a Bathroom is Worth the Effort

In 2008, I bought this brick 5-bedroom, 1-bathroom end-rowhouse with a tiny kitchen for $76,000 via a short sale. I borrowed $100,000 from a private investor. I had a few things fixed, put in new carpet, and had the interior painted. I thought I could sell the house for $129,900. Boy, was I wrong. After 17 long months, I sold it for $108,000 and was lucky to get that. I ended up losing a little money on top of wasting my time.

What I should have done was convert one of the five bedrooms into a full bathroom. That would have turned the house into a 4-bedroom, 2-bathroom residence. After all, if someone needs five bedrooms, they will most definitely need at least two full bathrooms!

Another thing I should have done is kept the house as a rental property. Today, 13 years after I sold it for $108,000, the Zillow Zestimate for that rowhome is $225,400. I could have enjoyed collecting rent, benefited from tax depreciation, and also received appreciation in the value. I could have paid off the private investor with a fixed 30-year cash-out refinance. Or perhaps I could have paid off the original investor with the cash flow and today I’d own the house free and clear. Woulda, coulda, shoulda.

A 5-bedroom, 1-bathroom house just doesn’t attract a lot of buyers or renters. A 4-bedroom, 2-bathroom home is far more appealing.

Today, my wife Amira and I look for properties where we can easily add value. The last two houses we bought were technically 2-bedroom houses, and we added a third bedroom in each one. Each house already had a room with a window and at least 80 square feet. We just needed to add a closet in the respective rooms. On our most recent purchase, we also needed to add a door. That’s it! A 3-bedroom house is worth much more than a 2-bedroom house, and it holds more appeal for buyers or renters. (We’re renting out these two houses so we can enjoy the cash flow, depreciation, and price appreciation!)

On another house we bought, we added a half-bath in the largest bedroom. It was a 3-bedroom, 1-bathroom house. By adding a half-bath, we created a simple master bedroom. That likewise added value. We paid $136,500 for that house and conducted a $17,500 renovation over a 17-day period. Just over three years later, Zillow’s Zestimate is $285,700 and the rent we collect is just under $2,000 a month.

Look for ways to add a bathroom, even if you have to remove a bedroom. One of my recommendations is to turn a 4-bedroom, 1-bathroom house into a 3-bedroom, 2-bathroom home. And if you can turn a 2-bedroom house into a 3-bedroom house easily, do that!

Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania.  He became a full-time real estate investor in 2004 after serving in the U.S. Navy.  Tai made colossal mistakes in investing (and learned some things along the way).  Tai has coached hundreds of entrepreneurs, real estate investors, and real estate agents on how to increase their income and net worth. He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Amazon.com. Tai may be available for coaching and speaking engagements on a variety of real estate topics.  Send an email to tai@investandtransform.com.

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