How much does an extra room add to a house’s value?

When buying a home you will have to ask: ‘How many rooms do I need?’ The answer will vary on what you need the property for, whether that be as an investment or to live in.

According to data compiled exclusively for The New Daily, you may want to factor in the cost before deciding on that fourth bedroom.

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An investigation by Andrew Crossley, author of Property Investing Made Simple, a worldwide number one best-seller, has revealed that the price of an extra bedroom is not small.

Almost $100,000 for a room!

An extra room in an established house could cost you as much as $95,000, based on calculations by Mr Crossley.

This represents the average difference in the median price of three versus four bedroom homes in six suburbs across Australia.

The suburbs selected at random were: Manly, Carindale and Ipswich in Queensland; Ringwood North in Victoria; Tamworth in New South Wales; and Spearwood in Western Australia.

“Five of the seven suburbs I looked at are all over $75,000 difference for established dwellings,” Mr Masters says.

A much smaller price gap of $20,000 was found in Hobart, Tasmania, which was not factored into the average.

These are indicative figures only, so you should not rely on them when deciding the size of your next home.

Here are some more reliable tips to help you decide on how many rooms to buy.

mon_300514_shutterstock_movinghouseBuyer demand

Mr Crossley says the most important factor should be what buyers are looking for in that area.

“Investors need to appeal to the vast majority of the market in that location. So they buy whatever is appealing to the vast majority, whether it’s two, three or four [bedrooms],” Mr Crossley says.

When renting, two might be better than one

Property expert Josh Masters, a Sydney-based buyer’s agent, says as a generalisation that two bedroom homes lease better than single bedrooms.

“The majority of rental properties tend to be units, and then they tend to be two-bedders.

“If you were [looking at] a one-bedder, I would say ‘yes’, if you can afford to get the second bedroom, absolutely you should because you will attract so much more of the market.

“You can imagine, if you were living by yourself, you’re a single person, then there’s a good chance that you’ll meet someone, you’ll hook up together and suddenly that one bedroom is not big enough,” Mr Masters says.

A third bedroom might not be worth it

Mr Masters says that two bedroom homes often attract longer-term renters.

“Often three-bedders are formed by professional couples getting together or three friends. That won’t last forever. Usually they’ll move out by themselves if they increase their salary or something and they can afford something on their own. They’ll generally downsize to a two-bedder, and that’s why two-bedders tend to be more popular,” Mr Masters says.

But Mr Masters cautions that demand varies depending on the suburb, and you should seek professional advice.


For growing families, four beats three

When it comes to the family home, Mr Masters says an important consideration should be the cost of upgrading in years to come if your family grows.

Selling a home that has become too small will cost you approximately 8 per cent of the property’s value in turnover costs, Mr Masters estimates.

“If you sell that property later on, you’ll pay your selling agent’s fees, and then you have to buy a new property, which means paying stamp duty again and paying legal fees, so those exchange costs can really add up,” he says.

So if you intend to have more children, keep this in mind. Of course, the size of home you can afford will depend on your own financial situation and your ability to repay a mortgage. Be sure to seek independent advice.

Is it worth it?

To find out whether the cost of an extra room is worth it, Mr Masters says you will need to whip out the calculator and crunch some numbers.

“Look at your three bedroom sales, look at your four bedroom sales, and get an average. That way, you’ll know which market you’re in. That’s really the only way to do it,” he says.

You will want to factor in the number of parking spaces to this calculation as well.

Estimates calculated by Mr Crossley using Real Estate Investar software

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