Add an Addition or Buy Another Investment

[Gia S.]

Hello all. I’m a newbie and this is my first post! And it’s a long one :0)

I have a small rowhome in an up and coming area in DC.  I bought the property six years ago for 240k and put in 100k.  Homes like mine are now going for a little over $500k. This was my home for some years, but I started renting it out last year when I moved away for family reasons. They are building a new town center at the corner of my block (literally) with over 1300 new apartment units, 250k sq ft of office, and retail space. The project has already started and all phases should be done in 3-4 years.   I’m thinking of moving back in 2-3 years and have been contemplating adding an addition up and out before renovation prices get crazy in the area but still want to keep the income.

The house has 3 bedrooms and 2 full baths and rents for $2200. Because of its location, I cannot have two proper units, but can have a main unit and an ADU or rent as one house (although I'm hoping the new development will bring a change to my zoning code) The basement has 8ft ceilings and is completely finished but I'm thinking of digging down behind the rear wall to add a full bedroom and reconfiguring the floor plan to accommodate another room, kitchen, and door to walkout (2 bed/1bath unit). At the same time I also want to add a bump out to the 1st and second floor as well as add a third story addition. This would mean the house would have about 7 bedrooms and 5 1/2 baths. Based on my research, a modest budget for the project will be about $350k, so I'm wondering if it's worth it to do all of that or just find another property. Your advice is truly appreciated!