New Construction / Should we tear down and rebuild?

[Scott Kinsel]

Good evening - 

I live in an older ranch style home in the Memorial Villages area of Houston, Texas.  Home / property values in this area are ridiculous.  The lot behind me just sold for 1.4mm (25k sq ft).  Four more houses ON MY STREET are about to be leveled and new homes are going up.  My question is this ... My lot is worth roughly 1.1 million.  It's smaller than the one behind me.  My house is 60 years old and probably not worth renovating.  Should I 1) sell the house for 1.4mm or 2) tear down and rebuild.  Assuming I can build for $200 a foot for a nice custom home, I could turn a really nice profit and do it all over again. 

We have been in the current house for 5 years.  If I tear down and rebuild, does the 2 year occupancy period start over after completion for tax purposes?  Stated another way, to get the favorable tax treatment for gains on your homestead if you live there for 2 of the last 5 years, would I be ok?

[Will G.]

the 2 year rule will NOT restart, as your address stays the same, if i understand your post right.

So your thinking of spending $600k, ( for 3000 sf), a year building out a new home, plus demo costs, hold costs, alternative living arangements etc, plus the risk of where the market will be 18 months from now?

What will that new house sell for?

I would be on the side of booking the gains, selling now ,but are you moving out of the area or do you have to buy something else in the area?