Tear down and rebuild

[George Firn]

Hi BP,

I have a lead on a property in Canton Michigan that is in a great location surrounded by newer homes that have sold from 296k up to 425k. The house on the property is small and not in very good shape so I think the best option is to tear it down and build new. A realtor friend of mine did some checking and fully fixed up it would only sell for 100- 130k tops. I've never done anything like this so I would like to hear what you think. 

What are some of the options for going about something like this? Are there builders out there who would build on the property and share the profit with the owner or would the property owner need to fund the build? 

What does it actually cost to build a house that would sell in the 300-400k range? What other costs are involved? The house is on public utilities so that wouldn't need to be added.

What other questions should I be asking? 

Thanks for your input! 

George (from Ypsilanti)

[Courtney Dziewit]

Hi George - 

I am currently building a house in Birmingham, MI - that was also a tear down and new build. I'm not sure what other builders are doing out there in regards to splitting profits, but we are the property owners and also the general contractor.

As far as costs, What are the comps, if you are saying that newer homes are selling for $300-400K - what is that per square foot? What are the finishes in these newer homes that is making them attractive, because you will have to factor in that cost - Marble? Granite? Window type?

The next thing I would do is put together a budget with those finishes to make sure that the numbers make sense. Call up some subcontractors and tell them you are putting together a budget and would like to know what "X" costs per square foot (Concrete, framing, plumbing, electrical, etc.)

Also, I'm not familiar with Canton requirements but, talk with the city on any setback requirements depending on the size of the lots and in regards to your particular lot. 

Hope this helps and best of luck!

Courtney