Reply to How to finance a teardown?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]If new construction is going for $2, then the land is probably worth $700k.  If your property is worth $1.1, then you would be losing $400k in equity when you raze your house.  Your house still has value in addition to the land.

You would be better off selling your house for $1.1 and buying a tear down for $700k in the neighborhood.  Then you would probably spend about $900k on construction and it will be worth the target $2 million.

So either way, you end up with a $2 million property, but the way you are trying to do it would cost you $2 million to get there, and the way you should do it, it would cost you $1.6 to get there.

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If their house has value beyond its land and can sell for 1.1. mil vs 700 then their house is not a tear down in the first place.  They just don't like it anymore and want an upgrade.  The easiest amove would be to sell it and just buy another house already built or remodeled to their tastes.  Also, if the house has value of 400K, then how is it possible that remodel would be as costly as new construction?  Building another level or raising ceilings (a  new roof) cannot possibly cost 1.6 mil.

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Also, tearing down a home always involves destruction of the lot and its landscaping, which is costly to restore.  A remodel can be done around it, where you aren't destroying all of your land features and having to buy everything again.   You also may not even need to move entirely out of your home if you can live in the basement or at least move your stuff into the basement vs. having to hire movers.  Tearing down your home costs a lot more in many ways.  I know people who had done a floor addition and almost gut renovation of their main level and lived in the basement that entire time saving money on moving and rent elsewhere.

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