Thinking of doing a home renovation. Currently have $265k remaining on a house that would sell for $425k. Plan is to double square footage by adding a floor; full master plan would cost around $400k and make the house worth around $750k. We'll start out with a phase 1 that costs around $300k (with as little as possible coming out of pocket) and then save for phase 2.
Anyone have experience doing something like this? Any particular areas to watch out for?
Chief
So you are going to spend $400k to add $325k to the value? There might be good reasons to do this and when you are done hopefully you have the perfect house for you but financially, it sounds like you are throwing away $75k. Have you looked for a new house?
Oh also I'm thinking the finished product *could* be worth $800k or more, but I would rather be conservative in my analysis
Chief
$400k to add a floor seems incredibly expensive. Have you gotten multiple bids?
Unfortunately yes - three bids, all pretty close to each other. It's $275k to $300k to go up and $100k to $125k to gut and reconfigure the first floor; kitchens around here run $75k+ on their own.
Enthusiast
Assume cost and time overruns. Just standard for any kind of project that big. Figure 20% minimum on both. My next door neighbor actually did this exact reno and theirs were more like 35%. Also keep in mind the extra cost of living somewhere else while the reno is ongoing, which will add up. So give yourself a big financial cushion - you don't want to run out of money partway through.
Honestly it's not a fantastic investment in terms of pure RoR so I would only recommend taking on a project this big if you're planning on living in the house for a while before selling.