Add On To The House?

Gene should not add on to his house because he would completely over-build for his neighborhood and lose money in the long run.

QUESTION: Gene has a house that was built in 1952.  His wife wants to build onto the house, which will dramatically increase the value and over-build for the neighborhood.  Should they do it?

ANSWER:
If your house is worth $40,000 and you put $70,000 into it by adding on, you have a $110,000 house.  If other houses in the neighborhood are selling at $50,000 - $60,000, you’re going to lose a lot of money when you sell the house. 

Whether you want to move from the house or not, whoever inherits this house is going to lose money on it.  From an investment standpoint, building onto this house in this neighborhood is a very bad decision.