The short answer is YES. Your home will almost assuredly be worth more, if you improve the size of the home. In fact, just updated certain features will also increase the home's value. Since homes in a particular area sell for a certain range of $price/sq. ft., increasing the size will bring up the value, all other things staying the same.
You have to consider the cost of the upgrade, and how much that will increase the value of your home. A complete rebuild will have different expenses than just upgrading on the existing property. Ultimately, you need to determine how much you planning on spending for the remodel/rebuild, and what your expected home value will be upon completion.
Example - if your home is worth $600K now, and you put in $200K worth of upgrades, you would hope to increase the value to at least $800K, to make back your investment. Otherwise, while the dollar value does increase, the net equity you have in the home will not.
Hope this helps!
Alan Kurpiewski, RealtorÂ®
CA BRE 01912043