Tear Down and Rebuild Costs?

Question

Hi all,

Looking for any & all help/advice on a potential deal in Jersey City Heights portion of New Jersey. I have an off market deal on the table for a Single Family property (although it's being used as a 2 family) in Jersey City Heights portion of NJ for $275K.

While that's a pretty good deal for the area, especially for 2 family (JC Heights is blazing hot),  the condition of the interior is it rough shape. Two tenants there currently are not living in conditions I would be comfortable with in addition to the legality concerns. Major repairs would be needed, probably 100K worth plus the re-zoning issue, now the deal doesn't look as good.

Still, even as a dump the property is in such a great location, I'm pretty sure it would go on the market for $300K maybe even $325K AS is. The taxes on it are nice and low. Market is still going up. Could I get the deal down to $250K? Maybe, but not much more, the owner is aware of what it will go for on market and almost certainly won't take less.

That leaves me with the final option of buy for $275-$250K, tear down, re-zone to a 4 family (owner claims he checked with city and this could be done on his lot although obviously I'd double check that myself), and re-build as a brand new 4 family that could safely net $1800/unit if done as 3BDR/1BTH. And this comes the the heart of my question....

Anyone have experience with a buy, demolish, re-zone, and re-build in Hudson County? As a relatively new investor (only 1 unit to my name) I don't have a clue where to start, other than I realize this is a risky move and I would need an architect.

Some really ballpark estimates I'd like to check, first with eye ball test from the very experienced BP Members :)

Land Cost - 250KTear Down - 25K?Rebuild to 4 Family - 250K?Do these figures seem realistic? Assuming no underground oil tank....was told none there

If (and this is a huge IF) I could keep it under 550K all-in and make it a 4 family that would be a big win and in theory would cash flow. Realize lots of risk but return might be worth it.

Not sure where to start on this one....any help, even from out of state would be greatly appreciated!! Thanks!!

@John Errico

Alok Sood · Answer

@Nick Intrieri - I haven't done a complete tear down but down to the foundation pretty much on my current flip. I'm assuming that for a 3 bedroom you're going to need about 1000 square feet per unit minimum. Building costs through a general contractor are going to range from $100 - $125 per sf (roughly) so that's about $125k per unit. You're probably looking at a building cost of about $400k-$500k so all in at $650k-$700k.

Now you might be able to save some portion of this if you can gut and reuse some of what's already there but that will depend on its current structural condition.

I would consult with a GC just to get more realistic numbers and also make sure you have adequate financing with contingency funds before diving into this one. Also, check out what comps are like for similar type of new construction in the area.

Good Luck!

Marc Celestin · Answer

@Nick Intrieri before you do anything, head down to the zoning or planning board in Jersey City.  You can review the master plans and zoning for the area.  You can talk to officials there to advise you on a variance, if necessary.  Pull comps in the area for 3-4 family new construction to give you an idea if your proposed plan is feasible.

Nick Intrieri · Answer

Thanks all for the very detailed comments. I really appreciate it! Sounds like a trip to the zoning office is in order.....

@Edward Casano I haven't gotten that far yet but most likely would be financing unless I could round up some investors. Owner is ok with financing.

Ryan Goldfarb It's not a standard lot...16.67 X 100. Current structure doesn't even have 60% coverage. Surely - Let's chat about it at the next meet-up

Still think this deal is a long shot but it never hurts to learn something new. Will keep you guys posted, thanks again!!

Ryan Goldfarb · Answer

@Nick Intrieri - both  and @Marc Celestin and @Alok Sood are spot on. The Zoning Office in Jersey City is pretty helpful -- I'd spend a morning or afternoon there to pick their brains. It's located in the building at 30 Montgomery St. in Downtown JC.

Construction costs will vary widely, but new construction in The Heights will feature fairly high-end finishes, so keep in mind that costs will be on the higher-end, too. You'll want to ensure that the property has the infrastructure in place to handle four units, or else some upgrades may be required by the utility companies -- not an insurmountable challenge, but they tend to take their time and work on their own schedules.

1,000 SF is adequate for a 3-BR in this area. However, do you know the size of the lot? 25' x 100' lots are standard and can house a nice sized 4-family, but if you're going with new construction, you'll be restricted to a certain footprint without a variance. It'll depend on the zoning district and whether or not its historic, but I believe the norm for a new project without a variance is a 10' setback in the front and 30' in the rear, which equates to 60% lot coverage on a 100' deep lot. It's all very nuanced, so, again, your best bet would be to spend some time with the folks at the zoning office.

Best of luck! Curious as to the specific location - fill me in the next time we cross paths!

Jim Adrian · Answer

@Nick Intrieri

I agree with @Alok Sood numbers for cost per sq ft.  I think 1000 sf for 3br 1 is tiny which I think you may be closer to 1500 - 1800 sf range as a minimum.   Talk with the local building department first about rezoning and code compliance as this will be a deal breaker before you even start.

Edward Casano · Answer

Hi Nick,

If the math checks out... Are you paying all cash or financing the deal? Either way, have you researched renovation loans like the Fannie Mae HomeStyle loan? Would the owner accept an offer with this financing? That sounds like a better option for you to make this deal happen with less out of pocket. I haven't purchased my first deal yet, though based on my extensive research on renovation costs I'd say @Alok Sood's estimates are fairly accurate.

Good luck and please keep us posted!

Tear Down and Rebuild Costs?

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