Is it worth adding expanding my home?

[Jeff Hsieh]

Hi everyone,

I currently live in a 3bd/1.5ba home in South San Francisco, CA.  I'm thinking about upgrading the 0.5 bath to a full, and adding about 500 sq ft extension to the back of the house. This extended portion would be a small living area with kitchenette, a full bedroom and bathroom. I could use it as a guest room, or a private portion of the house to airbnb/rent out. I've gotten a quote from a contractor for about 220k to get everything done and I'm here to get some perspectives on whether or not the price is reasonable, and if it's worth the upgrade. I am meeting with a few more contractors this weekend, but wanted to see if I can get some thoughts here first.

A few facts:

-Assume all permits and drawings are approved by the city.

-Most homes in my neighborhood are 3bd/1ba. Am I over-upgrading my home?

-Homes here sell for about $600/sqft, so if the expansion is approx 600 sqft, then it would add 300k to value of home. Is this too optimistic?

-We have a 640 sqft shed in the back that needs to be demolished. (quoted 15k, included in the 220k full estimate)

-The 1/5 bath needs a shower, and because it's small, we need to move everything around, and also move shift the door a few inches. (quoted 27k, included in the 220k)

Please let me know if I can provide any additional details and thank you in advance for your help!

Jeff