a replacement cost of 125% of the new addition’s price. For a home that was originally valued at $200,000, adding a $100,000 addition raises the value to $325,000 in total, so you can expect your premiums to jump a good 50%. Taxes follow a similar logic, but are also dependent on many other factors. A value will be stated for the new addition on your building permit application. This amount will be added to your home’s valuation for the following tax year, which typically increases your annual property taxes. However, taxes change year-by-year based on the housing market — for a home’s value that’s skyrocketed based on a real estate bubble, you may see a significant increase. Vice versa, a slumping real estate market may see your taxes experience only a minimal rise. These factors will play heavily into how potential buyers view your property when determining if your home is a worthy investment. Taxes and insurance premiums will also play a part in how much money you are able to recoup — for a house that’s been stuck on the market a while, you may find that these costs begin eating into your ROI.
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