Shall I add a 4th bedroom?

Question

Hello BP family! I recently purchased my 2nd rental property and I plan to BRRRR this one. The rehab should be done this week. I wanted to know if I should make another bedroom where the living room and dining room are located. I feel it would work but am worried it will have 2 doors for that room. So folks that enter the house from the front door and would have to walk through this new bedroom to get to the hallway and access the rest of the house. I have attached a pic for an idea. Let me know if any has done something similar. I was thinking for my future tenant who has 3 in total that the new room can be used as a dining room, game room, etc. It will have a small closet I their to make it an official bedroom

. Thank you.

Kevin Sobilo · Answer

I don't think the appraisal will jump $30k like you believe because this isn't a good bedroom. A walk-thru bedroom is functionally-obsolete. In modern houses they aren't desirable. Appraisers make decisions and use their own discretion. So, an honest appraiser won't value it based just on the high level numbers you are looking at. Here is a different example. MANY years ago some modest houses were built with LOW ceiling heights below 7'. If you just looked at comps you would think a certain value based on square footage, bedrooms, etc. However, modern appraisal practices require that these spaces with low ceiling height be valued LOWER similar to how a finished basement is valued. Perhaps call and ask an appraiser, maybe I'm wrong. You could even ask them to do a limited scope appraisal where they generate a light appraisal without a site visit and usually for about half the price.

Clint Jusino · Answer

Thanks Kevin for the tips and advice. I have never heard of a limited-scope appraisal and will look more into this option. Thank you.

Jake Baker · Answer

@Clint JusinoI wouldnt add a fourth bedroom if it makes the lay out funky. I find there is more value add when I add a bathroom

Jay Hurst · Answer

Are the other 4 bedrooms in the area a walk through bedroom? I would assume not, and if not, the appraiser will not give credit for a true 4 bedroom comparing against true 4 beds.

Kevin Sobilo · Answer

@Clint Jusino, your property looks too nice for a "walk-thru" bedroom to be any added value. If you were in a low class area, then people who need an extra bedroom will make due, but that looks pretty nice. I can't imagine a tenant for that property using it as a bedroom. I don't see that it would add appreciable value for the appraisal or for rent, AND when you go to re-sell you would probably want to tear all that work out and put it back how it is now as your typical buyer is probably an owner-occupant and would prefer it as it is now. I have actually REMOVED bedrooms during rehabs to make the end result more desirable turning 3 bedroom units into 2 bedroom to make them more desirable.

Clint Jusino · Answer

Hello Jake, I agree. I'll stick to converting the half bath room into a full bathroom instead. Thanks for the tips and advice!

Clint Jusino · Answer

Hello Jay, This is very good information to know. I wasn't aware of this. I thought 4bdrms is 4bdrms. I wasn't aware if it made a difference if its a walk-thru or not. Thanks for sharing this very important info with me.

Clint Jusino · Answer

It would be 110sq ft. The other side is the hallway to the rest of the house. I have ran comps and its a 37K difference between a 3bdrm 2ba and a 4brm 2ba which has my brain thinking if i should add an additional bedroom to the property. the renos for both would be roughly 10k. The rent is currently 2100. If I add another bedroom it will go to roughly 2500.

Theresa Harris · Answer

How big is the dining area/future bedroom and what is on the other side of the long interior wall? Look at local listings for 4 bed vs 3 bed. Figure out how much it would cost to do the renos and what they would add to the price of the house and the rent.

Clint Jusino · Answer

I was thinking the future tenant would have a living room and the dining room area (small square area) would be the future bedroom. I don't have a second dining area. The small window area is the outside of the house which is made of brick. How do I know if there's more demand for 4 bdrm in that area? I was just thinking how to increase the ARV to the highest I can. From doing research it is to turn the half bath into a full bath. Also add another bedroom. Does that make sense? It's not mandatory but I was putting on my thinking cap and was thinking how to maximize the space that I have. Where the door is the hallway that gives you access to the rest of the house.