Some facts of the house:Location: Nassau County, NY, Town of HempsteadYear built:1929Purchase price: 290,000 in 2013Condition: AverageLot size sqft: 5000Livable sqft: 760I'm seeing several houses in my zip code that have been demolished and rebuilt into new houses with the maximum allowable livable square footage selling between $1.0M- 1.2M.Which is a better option taking into consideration, profit and capital gain tax (assuming my household income of 80K)1) Should I sell this house as is at $450K2) Demolish this house and rebuild it without taking out a loan.

However, when you sell it, will the assessor consider the additional square footage in the assessed value or only use the permitted square footage? 

When we're talking about square footage between 500-1200 sq. ft. now it just becomes a matter of how big we want each of the spaces to be, right? 

@Brook Bolger, to add to what Peter said, if/when your property is listed for sale, agents inevitably will ask why there is a discrepancy between public records stating your house has 3 bedrooms and also the square footage so you'll need to tell them that it takes some time for public records to be updated.For the STR portion, when you apply for your permit and state that it's a 4 bedroom (or 5 or whatever including the ADU's bedroom count if including the ADU for guest use), the county may ask you the same question and you'll need to supply the permits and certificate of occupancy.

We agree that it absolutely depends on your design intent, including the number of stories and square footage, hillside vs flat and overall level of custom detail desired.

I am using the platform propstream to assist in my deal analysis, however in doing so I am confused as to why would a property be listed more than what it is actually valued at prior to a rehab being conducted. for example this property is listed for 70,000 but the arv is calculated at being 66,000 but the comps that i ran that sold within the last 6 months had purchase prices of 165,000/ 30,000 / 28,000 / 25,000. and the square footage of the comps are 1,500/ 1,494/ 1,218/ 1,424.

Got it @Ryan Judy, you're running into local building code of course which can be more restrictive than the state.If the lot has the square footage, could you build a second structure on the lot?

Nearby nice 1 br apartments of similar square footage are renting for $1750.  

Since the attic is no longer a livable area it cuts my 2nd unit square footage nearly in half. 

Can I use a single-family home with similar square footage as a comparable?