Home Extension or New House

[surpasspro]

My wife and I are trying to decide on a new house or make an extension to our current home.  I own a 2-family house in NY; we rent the top floor which leaves us with a 2 bedroom apartment.  We have a toddler with a new baby due in the Spring.  We want to have 3 bedrooms for all of us and a 4th room with be nice for an office.

We started house hunting and are looking at a house that is $650k.  With property taxes, insurance, mortgage and interest that about $4,500 a month.  My wife isn't working due to the child and probably won't for some time after the 2nd.  So money is going to be tight if we buy a new home.  If I move I'd rent my current space so both apartments would be rented.  Prices in NY haven't dropped much due to tight inventory.  Buying a new home would also set me back $30k in closing costs alone.

My Dad suggested making an extension on my current home since I have the yard space.  I got some quotes and doesn't look like it would be more than $200k to add 2 additional rooms and a bathroom.  I get to keep my rental unit.  So we're torn as having a new house together would be nice (This was my home before marriage)..., but I'd have to be more mindful of expenses.

Has anyone been in this situation or have some thoughts?  Thanks

[Laura33]

My advice is that everything is going to be far more expensive than you expect, so hold on to your current situation as long as you can tolerate it (and until your finances settle out post-baby and you know how much $$ you're actually dealing with longer-term).

We are currently rebuilding post-fire, and I cannot tell you how unexpectedly high the costs are.  There are still supply chain impacts from Covid, which is decreasing availability of various choices and raising the prices of those that remain.  Contractors in my area remain slammed; our current guy is going to be charging literally a million bucks for our rebuild (in a neighborhood where not a single house has ever sold for that much), and there are still weeks at a time when the house sits with nothing happening, because he's juggling too many projects with not enough qualified employees/subs to manage it all.

OTOH, buying and moving?  We had to move into an apartment, and it is ridiculous how much unexpected $ we dropped on stupid things like cabinet organizers (because the old ones didn't fit the new kitchen) and new storage/furniture to fit into the different spaces this apartment has (like, say, a 12" deep console table for car keys, because that's all we can fit and still squeeze by).  And this was for a fully-furnished apartment.  Change that to a new home, and now you're adding new paint, window treatments, probably new/redone flooring, a new faucet here, a new hot water heater there, and oh that tile is ugly, and now our couch doesn't fit, etc.  And you're then coordinating and managing all of that with two small kids and a full-time job. 

The other thing is that right now, you don't actually know what your long-term financial situation is.  You think your DW will continue to not WOH, and that may be the case, but maybe having 2 kids under 3 will send her screaming for a nanny.*  Or maybe your baby will have big medical bills or special needs and your budget will be even tighter than you anticipate.  You can't actually know any of this stuff for probably the next year at least.

The good news is that you don't actually have to make this decision right away.  The baby can sleep in your room for a while, and can then bunk with the toddler.  It may not be ideal, but it is completely feasible for some period of time while you're figuring out what you actually need and what your long-term priorities are. 

I know I sound like Debbie Downer, and I'm not trying to be all doom and gloom.  But it seems to me like the downside of making the wrong choice here is long-term financial stress, which can seriously affect your ability to live the lives you want and enjoy yourselves along the way.  Whereas the downside of not deciding just yet is maybe a few months of the baby sharing the toddler's room.  Comparing the downsides, the choice seems rather obvious, no?

Congratulations and good luck!


*No disparagement meant here.  My two-under-five left me ridiculously grateful for daycare.  ;-)

[surpasspro]

Thank you for your insight... this new home is all re-done so there shouldn't be as much to replace, but you're right about the couch and needing new furniture.  We also don't know if we'll need nanny care or not, it may be too much for my wife to handle two kids alone even though I'm working from home.  Not to mentions classes and other child related expenses.

Right now if I need something I just order it I don't think too much about the cost as I know I can pay it off at the end of the month.  With the new house I would have to watch things a lot more closely.  I don't want to have to sell my stocks everytime I go negative each month due to larger expenses.  Its a difficult decision since we been house hunting for awhile and finally got an accepted offer.  Figures I just thought about doing an extension now as i'm getting my offer accepted.  I don't want to regret not getting the house and regret getting it if it becomes a burden.

[zolotiyeruki]

Wistfully looking at a four-bedroom for a family of four?  IMO, you deserve a facepunch.

You don't need a four-bedroom house.  Your kids can share a room, and in fact, it'll be good for them. 12 years ago, we were a family of six in a 3/2/2, 1100 sq ft plus the garage.  It was fine.  Three kids shared a 11x10 bedroom, and the baby slept in our closet.  The third bedroom was the play room, and we used the dining room as the office.  It was fine.  Once the baby moved out of our closet, our daughter moved into the play room, and things started to feel cozy (but still comfortable!), and that's when we started looking for a larger home.

If your current home is a 2-bedroom like the rental, then perhaps I can understand the desire to upsize so that you can have a quiet work area plus a couple of bedrooms. 

Laura33 is exactly right--first of all, you don't need to make the decision (or pay hundreds of thousands or dollars) now.  What you *can* do now is to sit down and define what your actual lifestyle needs are.  Make a list of all the ways you use your home.  Then you can start looking at what kind of home will meet those specific needs, without all the extra square feet of underused spaces and useless "features."

[Villanelle]

Can you put a fancy shed in the yard for an office, and then have the kids share a room?  I'd be loath to give up a low interest rate loan for an upgrade, if I could avoid it. 

[Metalcat]

I'm confused...why can't you just take over the other rental unit?

[surpasspro]

So the upstairs rental unit is a one bedroom. With kids we’d want all the bedrooms on the same floor. We could potentially renovate the rental to 3 bedrooms but would require removing kitchen etc. we’d rather keep it as a rental of the extra income.

The 4th room would serve as my office. There other two bedrooms would be 10x10 so not looking to make them huge. I understand sharing rooms but after a certain age you’d want a boy and girl in different rooms.

My current home is paid off so I don’t have to worry about leaving a low rate.

[zolotiyeruki]

So the upstairs rental unit is a one bedroom. With kids we’d want all the bedrooms on the same floor. We could potentially renovate the rental to 3 bedrooms but would require removing kitchen etc. we’d rather keep it as a rental of the extra income.

The 4th room would serve as my office. There other two bedrooms would be 10x10 so not looking to make them huge. I understand sharing rooms but after a certain age you’d want a boy and girl in different rooms.

My current home is paid off so I don’t have to worry about leaving a low rate.

"after a certain age"  - Be that as it may, it is many years before you hit that point.  There's little sense in spending hundreds of thousands of dollars now for something you won't need for several years.

Is the rental income ridiculously profitable, enough to exceed the cost of the renovations or buying a larger home?  Perhaps yes, but I suspect not.

[Metalcat]

So the upstairs rental unit is a one bedroom. With kids we’d want all the bedrooms on the same floor. We could potentially renovate the rental to 3 bedrooms but would require removing kitchen etc. we’d rather keep it as a rental of the extra income.

The 4th room would serve as my office. There other two bedrooms would be 10x10 so not looking to make them huge. I understand sharing rooms but after a certain age you’d want a boy and girl in different rooms.

My current home is paid off so I don’t have to worry about leaving a low rate.

I would run the numbers on it anyway. Removing a kitchen is a very cheap reno compared to building an addition during a supply chain crisis and labour shortage.

If your addition costs at least $200 (it will cost more, construction right now is insane), then to justify that compared to the rental, you would roughly want the rental to be generating at least 1% of that cost.

So is the rental generating $2000+/mo in income?

If not, then I would just use the space you already have. As I said, removing a kitchen is not costly, and you would already have the extra bathroom.

With the costs you are talking about to add two rooms and a bathroom, which you already have in your existing house, I just can't wrap my mind around an addition making sense unless you live in a VHCOL area where rents are massive.

[Villanelle]

How large is the top floor?  Is it bigger or smaller than your unit?  How many bedrooms?  I agree with Malchat that monetarily, it likely makes more sense to take over that unit than to build out (or move) even if you lose the rental income.  It might not feel intuitive, but spending $2000 a month to keep $1500 a month in income (for example) makes no sense.

And the reason I ask for details on the other unit is that I wonder if there's a way to make that unit smaller and take over some of the space, but not all, so you'd still have a rental.  Or even to integrate them now but in a way that is easily reversible.  Don't take out that second kitchen.  Cut a hole in a wall to combine them, which can easily be closed off again if at some point it makes sense to go back to 2 units. 

Your 2nd child is months away and you are already talking about how "at a certain age" the kids can't share a room.  Even if we take that statement as a given, that is probably 6+ years away.  So many things could happen between now and then.  It doesn't make much sense to change your living plan now based on a scenario that is years away. 

[Laura33]

So the upstairs rental unit is a one bedroom. With kids we’d want all the bedrooms on the same floor.

I want to flag this as an example.  You are limiting your view of your options, based on a number of assumptions that you are characterizing as needs, but that are really wants.  The only way to make a truly solid decision is to make those assumptions explicit, so you can see what each is costing you.

Sure, it would be great to have you and the kids all on the same floor.  But is that "nice" thing worth literally hundreds of thousands of dollars -- particularly at a point in life where your income is limited and you're adding a new dependent?  Is that really the highest priority right now? 

The problem with these unstated assumptions is that they can influence your thinking without you really even paying attention to it, so that you can in the end convince yourself that you're justified in making the decision you wanted to make all along.  Well, we can do X, but then the kids would have to share a room (which will be bad at some undetermined time years in the future) -- so that option's out; we can do Y, but then we'd be on different floors, so that option's out because Reasons.  Do that enough times, and you're down to "gee, so we either need to move to a 4Br house for a lot more money or substantially renovate our existing house for a lot more money -- guess we're stuck spending a ton of money."

To be clear:  I have no problem at all deciding that you value X or Y as worth however much they will cost you; those decisions can only be personal.  I just don't want to see you bullshitting yourself into thinking you're making a decision that is based on objective, logical, solely-financial considerations ("which makes the most financial sense, moving or renovating?"), when even the framing of that final decision itself comes from rejecting many other options based on a lot of unstated emotional wants.  If those things are really worth the six figures they will cost you, they deserve to be moved out into the light for full and fair consideration.

[sonofsven]

I used to get this question a lot when my clientele was younger families looking to move up from their starter homes. I did a few whole house remodels because, once you tear up part of your house and have a team of builders on site,  it kinda makes sense to get a lot more work done. And the costs go up up up.
I started advising folks in this situation to sell and buy the house that already had the (x) that they wanted. This cost me more than one big remodel job.
I also despise the ugly budget additions people slap on their houses, not that you would do this (I hope!), but just in general.
Any remodeling you can do on the original footprint is going to be the most cost efficient.

[Villanelle]

So the upstairs rental unit is a one bedroom. With kids we’d want all the bedrooms on the same floor.

I want to flag this as an example.  You are limiting your view of your options, based on a number of assumptions that you are characterizing as needs, but that are really wants.  The only way to make a truly solid decision is to make those assumptions explicit, so you can see what each is costing you.

Sure, it would be great to have you and the kids all on the same floor.  But is that "nice" thing worth literally hundreds of thousands of dollars -- particularly at a point in life where your income is limited and you're adding a new dependent?  Is that really the highest priority right now? 

The problem with these unstated assumptions is that they can influence your thinking without you really even paying attention to it, so that you can in the end convince yourself that you're justified in making the decision you wanted to make all along.  Well, we can do X, but then the kids would have to share a room (which will be bad at some undetermined time years in the future) -- so that option's out; we can do Y, but then we'd be on different floors, so that option's out because Reasons.  Do that enough times, and you're down to "gee, so we either need to move to a 4Br house for a lot more money or substantially renovate our existing house for a lot more money -- guess we're stuck spending a ton of money."

To be clear:  I have no problem at all deciding that you value X or Y as worth however much they will cost you; those decisions can only be personal.  I just don't want to see you bullshitting yourself into thinking you're making a decision that is based on objective, logical, solely-financial considerations ("which makes the most financial sense, moving or renovating?"), when even the framing of that final decision itself comes from rejecting many other options based on a lot of unstated emotional wants.  If those things are really worth the six figures they will cost you, they deserve to be moved out into the light for full and fair consideration.

Solid post from Laura.  OP, I hope you really open up your thinking to consider all of this.

By the time your kids "need" separate bedrooms, one of them will likely be at least 6 years old, if not older.  (Even then, they certainly can still share, and many of the families in my orbit choose to have kids share long after that, even when they have more space.  Many seem to prefer to turn a separate space they have into a playroom, and have the kids continue sharing, even though the space could easily give them separate rooms.) So by the time the oldest is 7+ years old, maybe the "same floor" thing becomes less of an issue.  (And as a kid I had rooms on separate floor from my parents many a time, and it was never an issue, and not even something I thought about.) 

It really seems like you are trying to talk yourself into this decision, by setting up these supposed needs, and catering to them even though they are years away.  It seems like you are looking for reasons to make this decision.  When it is something that will cost you hundreds of thousands of dollars and a huge amount of stress and upheaval, that seems odd.  It seems like you should be trying to talk yourself into staying.

If it is "for the kids", then ask yourself whether moving them from the only home they've ever known is worth the stress.  Leaving friends, potentially changing care providers, etc..  Those things are insurmountable, but they are stressors, and neither is sharing rooms insurmountable.  Or ask yourself if it is worth the stress and disruption of a *major* home renovation project, for all of you.    And is it worth the financial stress, and suddenly having to count and ration your dollars, since you say this would make money tight?  Is it worth canceling a family vacation (for example) so your kids don't have to share a room when they are +/- 3 years old?  What would mean more to the kids, and your and your spouse--kids with separate rooms, or a membership to the children's museum and a week every year spent at a cabin sledding and having snowball fights, and another week at the beach splashing in waves, seeing dolphins and making sandcastles? 

You seem eager to come up with why doing nothing or very little won't work, and also eager to ignore the ways the moving or adding will detract from your life.  It doesn't seem like you are reasonably and fairly evaluating both options, and instead you are looking only at the pros of moving/building and the cons of staying. 

[former player]

NHS advice is that the best and safest place for a new baby to sleep in the first six months of life is in the same bedroom as its parents.

The standard for social housing states that siblings of different sexes are able to share a room until the oldest child is 10 years old, then separate bedrooms are required.

[surpasspro]

Thanks for all the replies... we decided not to buy a new home. We don't want to sacrifice vacations, extra things we want while worrying about a new mortgage and expenses.  I spoke with the town as any addition has limitations with setbacks and square footage.  I learned I can only add 340 sq to my property.  Which if we added that to the main floor we could only add an additional bath and bedroom, so leaving us with 3 bedrooms. 

My current 2nd floor rental has 4 rooms, kitchen, living, bed and bath.  The ceiling height it about a 1.5 feet lower than my main floor.  The bathroom needs to be re-done as its aged and the apartment has limited closet space.  The home is a cape, so I can take the 340sq and former the front of the home and add more space that way.  The walls on the front of the home on that floor slant down so it limits space what you can put in that wall.  If we go that route then we limit our expenses to updating a bathroom and a dormer.

[zolotiyeruki]

You still appear to be missing the distinction between wants and needs.

It still sounds like, as Villanelle said, you are looking for reasons to spend more money than necessary in order to address the stated "problem" of "needing" two more bedrooms.

Thanks for all the replies... we decided not to buy a new home. We don't want to sacrifice vacations, extra things we want while worrying about a new mortgage and expenses.  I spoke with the town as any addition has limitations with setbacks and square footage.  I learned I can only add 340 sq to my property.  Which if we added that to the main floor we could only add an additional bath and bedroom, so leaving us with 3 bedrooms. 

My current 2nd floor rental has 4 rooms, kitchen, living, bed and bath.  The ceiling height it about a 1.5 feet lower than my main floor.  The bathroom needs to be re-done as its aged and the apartment has limited closet space.  The home is a cape, so I can take the 340sq and former the front of the home and add more space that way.  The walls on the front of the home on that floor slant down so it limits space what you can put in that wall.  If we go that route then we limit our expenses to updating a bathroom and a dormer.

Here's where I think you're going wrong:
"I can only add 340 sq ft" - With an efficient layout, that's enough for two bedrooms and a bathroom.  They won't be big, but a good layout can compensate for a lot of square feet.
"the ceiling height is about 1.5 feet lower than the main floor" - so what?  If your first floor has 9.5' ceilings and the 2nd floor has 8' ceilings. who cares about the difference? If the upstairs has 7.5' ceilings, well, you'd be putting your kids up there, and they won't exactly be hitting their heads on anything, will they?
"he bathroom needs to be re-done as its aged" - Is it leaking?  unsanitary?  got mold?  non-functional?  If it's one of those, then yeah, it needs renovation.  If it's functional and healthy, the reality is that you want to make it look nicer.
"limited closet space" usually means "we have too much stuff."  This space is for your (very young) kids, whose clothes shouldn't take up more than a dresser, and probably be even less.  Do you even need closets?  Why not use a dresser?  Besides, reframing some of the space to add a closet is still a couple orders of magnitude less expensive than building an entire addition.

[Cassie]

We had a 2 family house and by the third kid it was too small. We thought about taking over the whole house but we needed some rental income. One day I got the idea to build an outside staircase to bring people to the second floor instead of them using the inside staircase. Then we had a wall built that separated the kitchen, one room and bathroom from the rest of the house. That gave us 7 rooms on 2 floors and an efficiency to rent.

 I fully furnished it with everything and mostly had divorced men move in. The kitchen was completely furnished and they only needed sheets and blankets. We had the walk made of drywall with a foot of installation and then another wall. In the event of a fire if our staircase was blocked by fire to go down we could have broken through the wall and went down their outside one. The other upside is that renting to one employed adult means very little noise. We also included all utilities.  We always had our pick from many applications. 

I have moved 30 times and owned 10 homes. Until this last move we always made do with the furniture we had and never bought specific furniture for a new home. 2 years ago I got divorced and at 66 decided I was only going to keep the pieces I loved and bought new furniture.  I knew this was my last home so bought a small condo that I can age in place in.

You don’t need nanny care with a SAHM. I had 3 kids and a good friend of mine had 6 kids in 9 years because they wanted a big family. Having occasional childcare so the 2 of you can have a date night is great but one person can easily handle a baby, toddler and all the home related tasks.