what i would do / am doing for our upcoming reno's
100% invest in VTSAX -
Why?
The reno isnt required you can make do with out it being done
You're more likely to make money than to lose money
Since the reno isnt 100% required you dont have to sell in a down market you can just postpone it and wait.
Take the stastically best chance for your money since you have the extra bedrooms already.
I'd do a construction loan for the addition - the basement refinish is likely not going to add a ton of value to the home but roll whatever you can into fixed low cost debt and take it to the full 30 year term if you can - with rates rising this could be an interesting math equation depending on when you do it.
why is there no option 3 - move to a house that suits your needs(wants) i doubt you add 65k of value to your home with this addition.
I was going to say this, ha!
My own situation:
2BR, 1 BA, 1146 sf house. No basement, no attic, no garage, whee!
Family of 4 (2 parents, 2 elementary aged boys). Boys share a room, bunk beds, the beds and a single dresser fill the room.
So, you don't really need more space yet. So, I'd worry about it later.
Now, to be honest, I'm jonesing for a 2nd bathroom. I really really want one. I can afford to pay cash for one, but at this point, I'm kind of just waiting to make sure I have a job for 2 more years.
I estimate that a bathroom will be $30-50k. A lot of that is permits. We aren't talking a fancy bathroom either. I'm considering adding a bedroom also, or at the least, "losing" the front porch (which is 5x10) and absorbing it into the boys' room. All in all, we'd be adding about 100-125 sf. Haven't started the process.
I have friends who are recommending that because kids "boomerang", that I really should go "up" (very small lot, not much room for "out") and add a bedroom and a bathroom to end up with a 3/2. Problem is, I've lived here a long time and I know the drill. First, we'd have to move out. For months. Second, house built in 1947, you'd have to completely redo the foundation to add a 2nd story. Third, 2nd stories are about $200k. Will adding a 2nd story make my house worth $200k more? (aka, a million bucks? ) no. So then you think of the alternative, which is just buying a different house/ bigger house.
Of course, I'm not wanting to do that because I like my neighborhood & my neighbors. You just can't buy that anymore. Well, you can, but it's going to be expensive. Prop taxes are an issue too.