Rehab versus tear down and subdivide

[Devin P.]

I have a property on 3.5 acres we acquired originally to flip. It has a pole barn, small stable with a small den above it (not liveable). The house needs a lot of work inside and out. We purchased as an estate sale for 220,000. Our original plan was to fix up existing residence with a reno budget of 150,000. We purchased the property cash and was planning on acquiring a HELOC on the property for renovation costs. A few friends have suggested tearing the existing structure down, splitting the lot and building two new construction homes after subdivision. We are looking into seeing if subdivision is even possible at this time. I am mostly looking for anyone to share their experiences, hidden costs, creative financing options that may help me decide what to do. The house next door sold for 437,000 on 1 acre. A few years old, nice, but dated finishes. The ARV on the flip we set at 490,000 to be conservative due to larger lot, pole barn and stable, and the finishes we have picked out for the reno.

To tear down and build two new homes, we definitely need financing options on the homes, septic, utility tie in, well and such. It sounds like a lot more work, but might be worth it for the ROI.