Isbef, I agree with the $100-$250 sq ft range for improvements on your addition. The ultimate number depends on your materials, budget or extravagent.
Recently, I am getting inquires for clients that have smaller homes, bought when the market was robust(2008) and now have minimal or no equity. Additionally, their families have grown. Frankly, the construction/remodel scenario comes up because they cannot afford to sell and they need the space because of the growing family. You want to find out if you can qualify for a construction/ remodel loan before you go further. See if the construction makes economic sense. Can you afford this addition? Will you have instant equity after competion or will you be getting less than 100% on your construction project?
Truthfully, if you can find a home that is acceptable, my personal opinion is to sell/rent and purchase. I have credit approved borrowers for construction loans and afterwards, they scrapped the project and they ended up buying an existing home. Also, I have done the other scenario where they love the area so much but need the space so they add on.
Most of the time, based on my funded construction projects and future value appraisals, the subject property is worth more than the acquisition costs + improvements. We use the guidelines of acquisition costs + improvements OR appraisal whichever is lower. Obviously, you would have to have enough information(loan amout) to give to your lender to see if you could qualify for the loan. See if the project you are considering is even feaseable.
Good luck and contact me if you have any questions. (email@example.com)-NMLSR#636343... more