Now that we’ve lived in our house for almost a year, we’re seriously thinking about how we want to renovate this house (if at all). Our neighborhood is hot–though not quite as hot as our previous one–and this strong spring market suggests that if we’re smart about renovating this house, we could literally sell it immediately and make a profit. I’m finding THAT is my favorite kind of renovation.

The thing we’re struggling with right now is just how far to take that renovation. We pretty much have three options:

1. Don’t renovate. Make cosmetic updates like painting cabinets and updating the bathroom. Pay off my student loans. Sit here and save, and jump ship when we find our “dream” house.
2. Add a second bathroom within the existing footprint of the house. Make cosmetic updates so this house looks totally renovated.
3. Bulldoze our 1950s carport and connected storage/laundry/mudroom and add a 400 square foot master suite addition.

I’m torn between all these options. They all have pros and cons, which I’ll detail below. If you watched my instastories a couple weeks ago you’d think I’d choose the middle ground scenario, but I actually think I’m leaning towards one or three above right now. For reference, here’s floor plan of our existing house:

Like many homes in our neighborhood, the house was advertised as “3 bedrooms/1 bathroom”, but it’s functionally 2 bedrooms. The third bedroom is blocked in by a family room addition that was built from a screened-in porch in the 1960s. That bedroom currently houses our dog crates, a dresser of my clothes, and some boxes of artwork we haven’t hung up yet. I’ve seen some people open it up and make it into a dining room. But people seem to be weary of removing the “bedroom” for fear of resale, and I’d be lying if I said I didn’t share those concerns.

Now to discuss the options.

First, the argument for doing nothing: It’s honestly very tempting to do nothing. It would be very easy to do nothing. The designer in me says no but the house dreamer in me says yes. We’ve seen a couple houses lately (for fun) that would be a stretch right now but comfortable fairly quickly, and it’s made me wonder if we want to tie ourselves to this house for a while (which a substantial renovation would require). We’re saving so much money right now that we would have a good downpayment on a great house whenever the right one came along. We could probably break even with some cosmetic updates if we sold our house tomorrow. We could also pay off my remaining student loans and be totally debt free except for the mortgage, and still have a good downpayment for our long term house in a year or two. But our house wouldn’t really be working for us and the notion that we are leaving potential profit on the table frustrates me. My student loan rates are pretty low and I’m mindful that using our cash to pay off that debt when it could be invested in something with a higher rate of return might not be the smartest financial move. Doing nothing would basically be deciding to move sooner than later. That would be an unconventional decision but we could afford it and it could be a good long-term decision so I’m not taking it off the table.

OK, now for renovating in the existing footprint. This renovation would be substantially cheaper than an addition, but it’s also risky. It has the potential to generate a good ROI, but it might also narrow our buyer pool. It doesn’t add any square footage so we’d have to make the house look totally updated to generate a high enough sales price to justify the effort. The cost could be small or get out of control quickly. The good news it that move-in ready houses in our neighborhood seem to be at a higher premium than space, but I’m not sure it’s the best way to use our cash. For kicks, here’s what I’m considering:

The biggest thing we would do is add a second bathroom, but where to put it? Some houses in our neighborhood have a second bathroom in a family room addition but I think that’s kind of weird. Who wants to walk all the way from a bedroom through the living and family rooms to take a shower? I’m also not sure it would work very well in our house because our addition is lower than the rest of the house and a bathroom might not work with the existing drain line. I’m playing with the idea of converting the non-bedroom “bedroom” 3 to a master bath and walk-in closet, giving this house a true (albeit modest) master suite. The down side is that it eliminates one of the pathways from the bedrooms to the family room so we’d likely enlarge the opening to the kitchen to make up for that. We’d have to move the refrigerator to accommodate a larger opening but that’s not a huge deal.

To maintain two paths from the front of the house to the family room, we could also simply add a master bath and use the remaining space from “Bedroom” 3 for circulation. We wouldn’t have to open up the kitchen and we’d create space for more pantry storage. The downside is that we wouldn’t gain any additional storage in the bedroom. That’s probably not a big deal for resale but for the purposes of us living there comfortably, we need more storage in our room.

OK, now for the addition. I did a financial analysis on the cost of an addition and projected sales price, and it’s definitely the most profitable option on the table (right now).  It would make this house more livable for us longer and provide me an opportunity to build my own personal design portfolio. It would also be the most expensive option and tie up most of our cash in the house. While we would very likely get it all out and then some, that still makes it a lot harder for us to buy our next house if the right one came along. The Alexandria market we live in is very competitive and contingent offers just can’t compete. We want the flexibility to move for the right long-term house. I don’t want us to sell our house and then choose a house we like enough because we have a deadline to move. So we’d be committing ourselves to living here for another 2-3 years minimum. I realize that most people live in a house for at least 5 years so this shouldn’t seem like a problem, but interest rates are rising and I worry that we’ll kick ourselves for not borrowing for our most expensive house while credit is so cheap and life is flexible. Here are two options we’re considering for the addition:

We have a sizable side yard and for a number of reasons, our carport/storage/laundry area actually scared off some first time home buyers who saw the house before we did. I have no problem with those spaces (it turns out they’re permitted and on the books) but I also have no problem losing them for a nice addition. In this option we would bulldoze the whole structure and build a master suite off the side of the house. To replace the laundry room, we’d tuck one into the addition so that it was on the same side of the house as the bedrooms. We would convert “Bedroom” 3 to the dining room and open up the walls into the new dining room and the kitchen. I like the way the laundry room makes for a small hallway so the bedroom isn’t right off the living area, but the master bedroom isn’t very big.

The mudroom/laundry room in our house was easily the most underrated space when we bought it. It’s the entrance I come in and out of, and having a dedicated laundry room is awesome. I wanted to explore an idea that kept the larger laundry/mudroom (also so muddy yard work shoes and rain boots stayed contained). I call this option a laundry/mudroom “revision” because I actually think we would end up rebuilding most of that room. The whole structure is kind of a funny shape (in plan and in section) and is heavily incorporated into the structure of the carport (my guess is that the storage room was previously a shed behind the carport). If we’re already building an addition, we might as well tackle the laundry room too. We still have to walk our laundry to the back of the house but it’s nice to have laundry in the more “casual” side of the house anyway.

Right now we’re thinking addition, but I also feel so tempted to do nothing for 6 months-year and move. My next step is designing the full addition in three dimensions so I can get real pricing from subcontractors for all the many components that go into this kind of a job. We really can’t make a good decision without those numbers. I look forward to finishing that process so we can feel resolved in whatever decision we make moving forward.

In the meantime, I’ll continue monitoring the local real estate market for a manageable fixer upper with views of the Potomac in a decent school district…