Should You Buy a Teardown?
Older homes that served our grandparents and parents well may appear poorly planned for today’s families. They tend to be smaller with closed-off kitchens, and fewer bathrooms and bedrooms. On the other hand, older homes tend to be convenient to work centers, situated in established neighborhoods, and offer some unique advantages such as large lots and mature trees that aren’t as prevalent in newer neighborhoods.
But buyers like you may be put off by a neighborhood that’s stuck in a time warp and perhaps run down or dominated by not-so-gently-used rental homes. But that’s where opportunity lies – between safety and risk. What makes buying a teardown a risk worth taking?
The key is getting in early on the trend. Ask your Berkshire Hathaway HomeServices network professional to show you neighborhoods that are on the verge of being up and coming. You’re buying the location, so the area should meet as many of your household’s needs as possible – proximity to schools, transportation, entertainment and enrichment, medical care and shopping. You should be able to spot a few homes that have already been extensively remodeled or scrapped and replaced by new construction. As you look at comparables, the home prices should be rising.
You should be looking for homes offered for sale at “lot value,” which means that the structure on the lot offers no further value. This is a great candidate for a total remodel or teardown. If the lot is large enough, you can either add square footage or tear down the house and build a completely new home. This is how neighborhoods get rediscovered and suddenly become popular with homebuyers.
If you’re set on building a new home, then the home you’re tearing down isn’t as important as the setting. Do you like the lot, its views, its position on the street and in the neighborhood? Then the risk may be worth it to build the home of your dreams.
Sometimes the new homes you see in gentrifying neighborhoods serve as an homage to the past. They may resemble Tudors, Craftsman, or Spanish Colonials, but they are built with every comfort and modern amenity, including more space. This is to help the new home fit into its neighborhood as well as set an example for other homes to be built. That’s not to say you couldn’t build a contemporary home, if you prefer, unless there’s a historical preservation restriction from your doing so.
The homes you see may have plaster moldings, stained-glass windows, all-wood stairs, and other artisan features that you may be reluctant to tear out, knowing that those things can’t be easily replaced today. You could either consider an extensive remodel around the features you want to preserve or to salvage them and incorporate them into your new construction. In some areas, if you remodel over 50% of an existing home, you can change the building date on the tax rolls from 1955 to 2021 as new construction, which will help when you sell it years from now.
When you find the home you want, take your architect and/or general contractor to see what can be built or extensively remodeled. Similar homes in similar neighborhoods help determine value, so don’t over-build without similar new homes nearby to support your home’s value.