Demolition Of House And Rebuilding - Is It Worth It?
I am looking to those very experienced in rehabs for advice. I have a property that I am about to put under contract in the next day or two - it's mine if I want it. The question is do I want it? The house needs to come down. I was just there with my contractor - seller told me it needed to come down, but I needed a professional opinion to go by. Shame is the interior of the house only needed cosmetics - exterior of the house is in shambles. Foundation is great! Can build on the site with a modular home or the like. My question is - do I want to do this? Is there a profit left in the deal if I pay $47K for the property, quote from demolition contractor for $10-15K, then rebuild home. The other properties in the area are maxing out at $160K. I will probably flip this house to another investor/rehabber, but I want to make sure there is enough on the backend for the other investor. Any help would be appreciated.
Thanks,
Susan
Well, what you are really buying is the lot, so the question is, is the lot worth $47K PLUS the $15K to clear it off? If it is not, then there isn't a deal here. In fact, if you are planning on flipping, the lot much be worth much more in order for another investor to be interested.
Another question, would a modular home sell in the area or would it be shunned by buyers because other homes around it were "traditionally built?" Very important to know.
And another question, exactly why does the house need to come down? From you post, the interior is good, only paint, patch and carpet I'd assume and the foundation is good. The only problem is the outside is "in shambles." What is so wrong that the whole house would have to be demolished? I mean, exteriors can be fixed, too.
Roger
Raj - Thanks for your prompt post. To answer some of your questions - I don't know that a modular home would work in the neighborhood, but that was what was suggested. I was just thinking of cost when I mentioned that, because to my understanding a modular home is cheaper to build than a traditionally built home. In your experience is that correct? Modular doesn't mean mobile home does it? The neighborhood is a working class one. Secondly, I would have thought the exterior of the house would have been salvagable, but my contractor and the seller (who built the house with his father in the late 1940's) seem to believe it needs to come down. They said that when the pipe burst the walls got wet, all the wood in the basement is wet, the squirrels have had at it on the exterior and there are large holes in the exterior walls of the house but only in the back. The house was never sided, so over the years and with the exterior holes in the back and side of house, they thought it best to tear it down and rebuild due to the damage in the wood structure from the water. If you know something to be different please let me know.
Thanks,
Susan
I'm not a contractor but I would get a 2nd opinion. I do think this is something that could be fixed.
If you must tear down, I doubt you have a deal. Are lots going for $57-62k? I doubt it in a 1940s neighborhood.
Myfrogger - Lots are not available in this neighborhood - everything is already built up. No new construction there. The property is tax assessed at $44K. Does that make it any more worth it?
Do you have experience with wet and/or rotting wood on a frame of the house?
Susan,
I don't think this property is a candidate for tear down and build new. The lot price of $47K in a neighborhood with values at $160K is way too high. If a builder were looking to buy this property, I think the price would have to be about $30K (and the builder would probably be able to knock the house down for much less than $10-15K). If anybody is a buyer for this property, I think it would be an end user--not an investor or a builder.
Nancy
Susan, the answer is in the numbers.
A 160K house doesn't usually sit on a lot worth 62K. A ratio of 25% is usually more in line making the lot worth about 40K.
Sounds like an ideal rental property. You can buy it cheap, do some cosmetic stuff and rent it out to cash flow immediately. Keep it until it falls down, after 20 more years the lot will be worth a bunch more, it will have paid for itself 3-4 times over and then the numbers of course will make better sense.
If you buy the place for $47K and houses are selling for $160K, it is certainly not going to cost $113K to rehab and still be able to get out of it "safely". I agree with getting a second opinion - you might want to get it from someone with disaster restoration experience.
I am closing on a house this week that had a fire 5 years ago and the owner has done little to the place since then. People who "know" about this house (the townie rumor mill) thinks it should be torn down. Instead, I took my contractor thru and he IS a disaster restoration specialist. It is one of those cases where it "looks" worse than it really is.