Tear Down And Build
I would like to buy a property in the NJ area to tear down and build a bigger house on the property, then sell it. Does anyone have any advice on how to find the best areas to do this where the "replacement" house that will sell for much more will be in demand? What are the main ingredients required for success in this type of project?
Thanks.
It is simple, do it in a neighborhood where others have done it before and are doing it right now. There is no need to try to find a secret neighborhood with all the right ingredients but nobody is doing it in it currently, because if that is the case then all the ingredients are not there.
What you are talking about is doing scrape-offs and building a spec house. One of the oldest adages in realestate is that you don't want the most expensive house on the block. So trying to find a secret neighborhood where this will work means you find a neighborhood filled with $300,000 houses and you build your spec $1,500,000 house. Think you would have some problems selling it? Who the hell will want to live in a 1.5 million dollar crib in what they would consider to be the ghetto?
The neighborhood that you want is the one filled with old $300,000 houses and a good selection of slightly newer $750,000 houses that were scraped or renovated 5-7 years ago and newer $1,000,000 - $2,000,000 homes that were scraped and built spec during the last 4-5 years and currently being done.
That is the neighborhood to do it in because the movement of appreciation is going way up because of all the other scrape offs and will support your project.
That being said I repeat: It is simple, do it in a neighborhood where others have done it before and are doing it right now.
As for the second part of your question, what are the main ingredients required for success in this type of project?
- Knowing what the hell you are doing is the main thing. You damn well better know what works and doesn't work, you better have deep pockets and be prepared to lose a lot of money if you screw up and build something that ends up costing you too much to build or lacks the floor plan and features of what is selling. The people who buy homes in these up and coming neighborhoods are very fickle, one down turn of the economy and they shelv their plans of moving and stay where they are and your buyers dry up.
Once you find the right neighborhood, find the realtors that specialize in that neighborhood. They will know all the builders who are doing what you want to do and can tell you tons of information about what works and what doesn't.
This is a theory used by mainly successful chains. IF there is a Mcdonalds then the opposite corner is good for Wendy's or Taco Bell...