Using equity to renovate/add bedroom to house.

[Cheyten Johnson]

Hello! This may end up being a long post. (Sorry for that...) But Thank you in advance for all your help.

Anyways, I have been talking with my parents about doing some renovation to their house. They want to add onto the garage and possibly add on either a third bedroom to the upstairs or more living room/ kitchen space.

Im not really sure how indepth I should get with this but they owe about 30k on the mortgage and the house is currently worth 90k. Comps on the same street are going for about 120k-160k. However most of seem to have atleast one more bedroom/100-200sqf more space.

With that being said I have a few questions that I would really appreciate some help with.

Could they use the equity in the house to do these renovation?

Would this be a wise use of the equity that they have? Or should they just fix the astetics and not add onto the House?

How would they go about pulling that money out to use?

Would this increase the monthly mortgage payment?

I am fairly new to realestate and investing and dont want to give my parents bad advise. So Any help would be very, very much appreciated.

Many thanks,

Cheyten

[Clark Kirkpatrick]

@Cheyten Johnson I'd talk with a realtor who knows your local market, if that's possible. 

Your parents could use a home equity line of credit or a cash-out refinance to pay for the cost of adding a bedroom, and hopefully the realtor could help them decide if it's a good idea or not.

It all depends on how much value the extra bedroom will add. If it costs $10,000 to add the bedroom, and it adds only $5,000 of value to the house, then it's not worth it. If it costs $10,000 to add the bedroom and the value of the house will increase by $30,000, then it is worth it. 

This is where a good realtor would be very helpful - they could help decide how much value the bedroom would add.