Are teardown and rebuilds effective?

Question

I stumbled upon a pair of houses in an area that could be greatly up and coming in the next few years - already seeing some gentrification around the area.  Neither of them are listed for sale, but they recently got to the point where plywood was put up over the remaining windows.

They are obviously not something that's going to be 'flipped' as the building in the back has a 2 foot hole in the roof and there are obvious signs of structural fatigue.  But the lot is in a great spot although looking at the plat, on one, there is a 24ft driveway easement that cuts through diagonally, and on the other, the build lines on the plat / deed don't match AT ALL to what the house is on the lot.

As I'm new to this, I can see the potential, but I have NO IDEA how to even get started on estimating something like this.  Does anyone in north Dallas (Lewisville / Grapevine / Coppell) have any experience with this and is willing to sit and have coffee on my dime so I can pick your brain?

Account Closed · Answer

Here is enough to get you started. First get information on the properties. Then find comps (rehabbed properties that have sold in the last 6 months within 1/2 mile ) and look for how much they sold for. Multiply that by 90% and that is your max investment you can put into the project. (You need to make some money to make all the hard work worth doing.) So, if houses sold for $200,000 you don't want to put a $300,000 on the lot.

Then look for the price of the lot as if it didn't have a house on it. You will of course have to pay the seller something, if they are willing to sell.

The next step is a little tedious. You have to call the city planning department and ask if you need permits for demolition, construction, plumbing, electrical, landscaping, etc. Ask how long each permit takes in your jurisdiction. Find out if the lot has sewer or septic. Find out if each lot is big enough to build a house. Sounds like you you may need a survey. Usually there are "set backs" and access requirements. Find out how long it takes to get approval to "break dirt" and the max size structure you can have on the parcel.

Then you need to talk to a builder or an architect and ask how much to draw up plans.

Ask a contractor how much to demolish and remove the existing structures.

And ask the builder or architect how much per sq ft to build it. That will depend on finishes. A low end build will be $00.0 per sq ft, a nice neighborhood type house will be $00.0 per sq ft and a really nice build will be $00.0 per sq ft.I'd add 10% for work order changes, delays and "oops, forgot about that" surprises.

Then you have to consider carrying costs. Are you using your money, a bank loan or hard money? Factor in a year's costs just to service the loan.

Add it up and see if 10% is left over for your time and effort.

That's not everything of course but as I said, it will get you started.

Sean McKenna · Answer

Makes sense to me. Sounds like you are thinking big picture and looking outside the box.

Teri Feeney Styers · Answer

@Ian Jaeger everyone is giving you great advice on how to do your homework. If it all makes sense then I can tell you that I have twice built new construction on old foundations and it was less expensive because of it.

Alex S. · Answer

@Ian Jaeger: I love buying lots with existing foundation as long as they are good. Here in Georgia we are required to have a structural engineer to sign off saying foundation is still good, and then I have my architect to draw plans to fit existing foundation. I built two last year on existing foundations and saved me about $13K for each lot

Ian Jaeger · Answer

@Sean McKenna agreed on the don’t overbuild.  The idea would be to combine 2 or 3 adjacent lots and then put up several attached houses... abig 4 Plex or something.  Seems like the zoning allows it as it stands but the plats are all relatively small

Sean McKenna · Answer

@Ian Jaeger It is sometimes quite difficult to rebuild a house on an old foundation.  I am by no means saying it can’t be done.  Sometimes it is necessary because of lot limitations or some other bs restrictions.

I can say. It is much easier to build a new house on a new foundation that is square and ready to accept a house. Meeting ALL current codes with proper tie downs.  You will absolutely need a professional opinion on the existing foundation if you truly intend on keeping it.

Going with a new foundation, you will know that it’s all up to code and inspected. AND you will truly have a new house.

As far as combining lots. That’s usually easy to do. But does it make sense? We don’t know the details of the lot. What are the comps like.  If you need the larger lot then do it.  But I caution you.

Don’t overbuild for the area.

Ian Jaeger · Answer

@Lynnette E. Thanks!

Looks like I have some calls to make to the local government folks.

I’ll check back in when I have an update!

Lynnette E. · Answer

The last questions you asked are going to have different answers for different areas.  If no one local answers here, the local building inspector or planning department should be your first stop.

i do not know anything about Texas, but do for CA so will give you an example for CA in regards to the foundation issue.

My mom's cabin burnt down from a gas leak.  The foundation remained and a few partial walls.  If she rebuilt using part of one wall, anf the foundation it was considered a rebuild instead of new construction.  So they has a test to ensure the foundation cement was strong enough to rebuild on and salvaged the best of the partial walls.  This rebuild classification meant she did not need to pay some of the new build taxes such as the school tax.  Saved her about $8k.

Texas may or may not have similar benefits to rebuilding.

You would need a survey before you rebuild just to ensure the foundation is actually on the lot.

To convince someone to sell or give away the property is an art.  It will depend on the seller.  Sometimes they just want to get rid of it and did not think anyone would want it.

Sometimes you can explain the value and why you want to do it, e.g. just starting out.

Sometings it was grandma's house and they can not give it up.  In that case, maybe a transfer on death deed, if TX has them would work and when the current owner passes you get it.  And you promise to build something that would make grandma proud.

Combining lots can happen.

Generally you need a survey, legal description, government approval and recorded deed change.  Your local folks will have to help you.  But before you spend money on it, make sure you talk with the building and planning folks and see if they object.

Ian Jaeger · Answer

Wow, those were very thorough answers!  THANK YOU!

Some follow ups:

The existing houses are definitely not in a condition to repair, but the foundations (from what I could see walking around the outside) didn't look to be in terrible condition.  They are old (1950's) but the concrete doesn't seem to be cracked like a lot of the contemporary foundations seem to be.  Are there any benefits to rebuilding from the foundation up, or is that the house is coming down, remove and rebuild the foundation and start from a green sheet.

If there is asbestos mitigation that will have to be done, and the property is worth less than 0, how do you convince someone that getting rid of it is better than letting it sit and rot?

One of the properties is actually sitting next to an open lot.  If I were able to get both the lot and the house, how easy is it to join plats when they are both drawn out with build lines on the drawings that are filed with the city?  I'm assuming this is something that can be done, but what's the process?  Just call the city and say you want to join two plats to build something bigger? They are zoned to allow attached single family housing, so in theory you could redraw the lines, but how common is this?

Lynnette E. · Answer

If you are looking at demoing the existing houses, first see if you can see asbestos or what the hazmat requirements are to demo the house.  Sometimes in some areas the old houses are not demoed because of the hazmat costs and that may be more than the land it worth.  Such as they should pay you to take it and the liability off your hands.

Are teardown and rebuilds effective?

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