New house over an old foundation - please explain

[Kate J.]

Hello Everyone! 

I saw in Chicagoland area that people are buying small houses and build over several floors. I wonder what are the potential profits from those? I saw it mostly in the north subs. For example, they purchase house for 250, tier down a roof and build over 2 more floors with new siding and finished basement, then sell for 800k or more. I wonder if any of you did this before and what are the actual profits? 

It seems as a good idea, since there is not much of land and it is not cheap when the land sells without a construction on it. I would jump into this kind of thing, but also how does one finds a contractor who would be willing to take such a project. Speaking of the buyer's side, wouldn't it raise problems that the foundation is very old?