Special Housing Needs
Require Unique Solutions

Question: My husband and I were planning a major addition to our Victorian home. Although there are many aspects to the project, the main reason for the addition is to create an artist's studio. My husband is a free-lance artist and needs more space for his expanding business. Our plans were stymied when we found out that the project would cost much more than it would add to the home's resale value. We intend to stay in the house for ten more years -- when we could break even if prices rise at a rate of 4% annually. We've looked at buying another house, but we've only found houses that are more expensive than the cost of our current home plus the addition. Does adding a space for a profitable business create an exception to the rule that says you shouldn't improve the value of a home beyond the value of other homes in the neighborhood?

Jennifer: I sympathize with your problem. I was in a similar situation for many years -- looking for a large business office in a home without over-improving for the neighborhood. Unfortunately, the rules don't bend because of special needs. If you over-improve a house, you create a white elephant that becomes difficult to sell. There are few exceptions. You could expand and hope to find a unique buyer who, just like you, is looking for a home with a large artist's studio and is willing to pay extra for it. But, when you sell, you play the odds. How many regular buyers are there going to be for every one who wants to buy and pay more for your special home?  100?  1,000?  A million?

Consider doing what I did. I bought a combination home-office. It was located in an area zoned for commercial development and had a home in the back. Perhaps you can find such a building that could accommodate both a large studio and a home. In these cases the value comes not from the residential real estate, but from the commercial or industrial usage, so your investment doesn't lose value. The home in the back is just thrown in. Unfortunately, the downside is that you don't get to live in a nice neighborhood full of Victorian homes.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Irwin's Power Tips for Buying a Home for Less," (McGraw-Hill, 2000).

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Jennifer, Mount Tabor, N.J.

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