Additions - Yay or Nay??

Question

Hello all! Starting out in the Memphis area - very excited! I've noticed a lot of the areas my partner and I are interested in are built in the 50s and are quite smaller. Lots are 3 bedrooms, 1 bathrooms. But 3 beds, 2 baths in those areas are going for more. We were thinking of trying to add an addition onto a house we are interested in. What are you more experienced flippers' thoughts on additions? Any good/bad experiences out there on additions?? Would love to pick your brain. As always, thank you so much for any comments! BP Community has been so helpful and great! :)

Dean Harris · Answer

@Jamie Hailey Since you are local, this will make things much easier on you. Large rehab jobs for out of state investors can be very tough and time consuming. Depending on where the asset is located, adding on to the property can make a real difference in your value/sales price. It is pretty easy to figure out if it is worth the time, effort and money to add on. Simply have your agent pull some comps in the community and just look at the difference in a 1 or 2 bathroom. That will normally give you the answer you are looking for. However, in some investment areas where there are mainly tenants and investment properties, this might not help you as much since the rent in Memphis does not fluctuate much from a 1 to a 2 bathroom. I have personally flipped property in Cordova and East Memphis (Colonial Acres) so I am happy to answer any question you may have based off my personal experience.

Best of Luck!

Jon Reed · Answer

Additions are very region specific because a new addition will cost $175-250 a sq/ft to do... so if your area homes sell for that much per sq/ft then it would be worth it. In our area, renovated homes only sell for $80-110 a sq/ft so it never makes sense to do an addition.

Adding a 2nd bath is a great idea but try to get creative with where to add one within the current foot print because moving interior walls is much cheaper than adding onto the house.

Colby Hager · Answer

I love adding additions to houses with pier and beam foundations.  Easy, cheap (nowhere near 175-250 per foot as quoted above), and fast to do.  Since you mentioned the area you are looking in was built in the 1950s, I'm assuming they are all on slab which adds challenges with plumbing and increases the cost.

Adding a bathroom within the existing footprint in the house is a must if the sold comps are all 3/2's.  Making a house substantially larger than the sold comps just to get it to a 3/2 is something I would pass on.

Best of luck!

Koleton Daley · Answer

@Jamie Hailey Memphis is an awesome market to own property in! What area were you primarily looking at? How are you finding your property? Source is one of the most important things when talking Memphis. We haven’t found much value in additions plus often time, with the homes being older there is a lot of updating that is required on the electrical side before you can talk additions. We believe in doing a quality complete rehab and buying in good areas for the best possible experience. Nicer kitchens and bathrooms have really worked well for us.

Keep in mind with these older homes they’ve got old plumbing, electrical, and sometimes will need a lot of work especially if they’re not being properly managed like ours were. We started working with Crestcore in Memphis and in our opinion, they were one of the most dishonest group in Memphis. It was horrible!! Please do a ton of recommendation research on your property source, contractor, and property manager. There is some really unethical groups that will overcharge you and often times will give contradicting advice from what we’ve seen them post and tell other people. Crestcore does post a ton on the forums and in our opinion, they’re what give Memphis a bad name for Real Estate. Unfortunately they wouldn’t get our recommendation whatsoever and we wouldn’t refer them to our worst enemy.

Please feel free to reach out if you have any questions or need any help with owning property in Memphis, it’s an awesome market with good culture, people, and fantastic BBQ 😃

Additions - Yay or Nay??

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