Should I tear down my house?

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Outer Marker
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Should I tear down my house?

Post by Outer Marker »

So, I have a nice 100 year old house in a highly desirable "urban" suburb of Washington DC. New 20 story office buildings and condos are going up within view of my front porch. Just far enough away. Close to the metro line.

I paid $1.1M for it a few years ago, and its probably worth $1.3M as it sits. I'm about to start on a major 1st floor renovation to make it more comfortable for our needs, and upgrade to all Wolf/Subzero appliances, etc. The reno will cost about $200K and it will be nice. But, I can't see the old house being worth more than $1.4 - so basically booking a $100K loss. There will also be a lot of lingering issues, like the too narrow staircases, and funky old wiring, etc.

On the other hand, if I tear it down, it will cost me $900,000 to rebuild and new construction houses are going for $1.8-2.2M. I think I'd at least break even, probably better. If I financed it, it would take me from cashflow positive to cashflow negative, assuming the bank would let me do it. Or, I could pay cash and have to pay some capital gains on a mid seven figure portfolio.

I kinda want the new house, as does my fiance. But, way more space than we'd need since I'm nearly an empty nester on the first go around, and we probably won't have another child on the 2nd go. I plan to sell the house in the next 5-10 years and either retire or be a "trailing spouse" in the foreign service. What to do . . . ?

Also, I'm wondering if I can somehow keep my existing 2.15% 15 year $700K mortgage and roll it into the new house. I can't find money that cheap anymore and would hate to give up that great rate. The land is worth more than the loan, so I'm wondering if the lender can waive me tearing down the house and take a security interest in the new one, once built.
123
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Re: Should I tear down my house?

Post by 123 »

Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
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Re: Should I tear down my house?

Post by wetgear »

123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
+1 That's a whole lot of headache for upgrades that you won't spend much time enjoying. 5-10 years minus renovation time, moving twice... :confused
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Outer Marker
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Re: Should I tear down my house?

Post by Outer Marker »

123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six. You can't buy anything around here, and I'd have exactly the custom build I want. I just hung up on two cold calls today from developers wanting to buy my house. Within view of my office window, 3 of the 5 neighboring lots are currently tear downs. I think the value of the land has eclipsed the useful economic life of these older homes. But I feel guilty about tearing it down.
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Brianmcg321
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Re: Should I tear down my house?

Post by Brianmcg321 »

Being that old would you be allowed to tear it down?

Houses like that in some places are part of the local Historical Society. You may not be able to do some of the renovations that you want. That may help you decide.

I'm with the others though. Sell the house now as is, and then buy something you like. You could be done with all that inside of a month. Why prolong your agony with a total rebuild?
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123
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Re: Should I tear down my house?

Post by 123 »

Outer Marker wrote: Mon May 10, 2021 4:09 pm ...From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six...
This will not be the only thing you hear from this builder that will not come to pass...

Typically builders will start with a fast demo (partial) or demolition (complete) so you are then committed to the project without any other way to go. Then things slow down as they fit your job in with their other projects. They want to maximize the use of their personnel and subcontractors so it's possible for a job to sit idle for numerous periods of time along the way as they sync the needs (both materials and personnel) of your project with others. They are trying to minimize their costs which may conflict with the completion of your project. Maybe the builder doesn't want to pay summer prices for a plumber when they can wait till winter when they're more available.
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JoeRetire
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Re: Should I tear down my house?

Post by JoeRetire »

Outer Marker wrote: Mon May 10, 2021 4:09 pm
123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six.
Plan on twice that.
And check out what is happening to the cost of building materials lately, before you decide.
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Re: Should I tear down my house?

Post by khangaroo »

I agree with the other posters about selling the house and buying something else rather than building new. I work in the commercial construction industry and the length of time (in both directions) it takes to build something always amazes me. The 4 month build for a $900k house sounds aggressive to me but I'm not quite sure what you can get with $900k in DC so it might be reasonable. Also, this might be the worst time to build a custom home with supply chain impacts, labor shortage issues, rising material costs, and also the government's lack of resources e.g., building permit processing, inspections, etc. I would imagine you would be paying a premium in escalation costs at least that's how it's going when we're budgeting for new commercial projects.

Are you set in your location? You can try to find your perfect house in a different part of the country/world. It's pretty nice in Oregon but the housing market is red hot like everywhere else but that kind of money can still get you a sweet house here.
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Re: Should I tear down my house?

Post by mkc »

JoeRetire wrote: Mon May 10, 2021 5:00 pm
Outer Marker wrote: Mon May 10, 2021 4:09 pm
123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six.
Plan on twice that.
And check out what is happening to the cost of building materials lately, before you decide.
From what we are seeing, builders are adding materials cost contingencies to contracts, so one would need to budget for this.

We have built 3 homes. The shortest build interval was 8 months and was a "stock" floorplan for the builder; the longest 12 months. Builders in our area (which is not DC) are estimating 18-22 months lead time before starting.

I would be concerned about a builder who quotes only 4 months, unless this is a fairly small, non-custom home.
New Providence
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Re: Should I tear down my house?

Post by New Providence »

Teardown and building new is a good idea.

But you must plan on costing more and taking longer than originally planned. There is just no other way about it.
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Re: Should I tear down my house?

Post by Normchad »

123 wrote: Mon May 10, 2021 4:19 pm
Outer Marker wrote: Mon May 10, 2021 4:09 pm ...From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six...
This will not be the only thing you hear from this builder that will not come to pass...

Typically builders will start with a fast demo (partial) or demolition (complete) so you are then committed to the project without any other way to go. Then things slow down as they fit your job in with their other projects. They want to maximize the use of their personnel and subcontractors so it's possible for a job to sit idle for numerous periods of time along the way as they sync the needs (both materials and personnel) of your project with others. They are trying to minimize their costs which may conflict with the completion of your project. Maybe the builder doesn't want to pay summer prices for a plumber when they can wait till winter when they're more available.
+1. There is no way your builder can go that fast. But you could ask for evidence that they have gone that fast before.

Personally, if I heard that, I’d get a new builder. Either they are lying, or they don’t know what they’re doing.

COVID slows things down. DC bureaucracy slows things down.... there is currently a shortage of lumber and construction workers.....
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Re: Should I tear down my house?

Post by Outer Marker »

I understand the suspicion about build time and cost - but I will say to my builder's credit, he delivered the first project (new deck) on time and to the penny on budget. Granted, a whole house is more complicated, but he does this all the time. Excellent reputation in the builder community (I have a few contacts) and came recommended from the guy who built my last custom home (who retired). I'm figuring to add 1/3 on time and $100K on budget and be pleased if it works out better than that.

I'm more struggling with the numbers. $900K vs. $200K is a big difference. I can easily take the $200K reno in stride. $900K rebuild alters my finances. But, you get what you pay for, right . . .?
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Re: Should I tear down my house?

Post by stan1 »

Outer Marker wrote: Mon May 10, 2021 5:24 pm I understand the suspicion about build time and cost - but I will say to my builder's credit, he delivered the first project (new deck) on time and to the penny on budget. Granted, a whole house is more complicated, but he does this all the time. Excellent reputation in the builder community (I have a few contacts) and came recommended from the guy who built my last custom home (who retired). I'm figuring to add 1/3 on time and $100K on budget and be pleased if it works out better than that.

I'm more struggling with the numbers. $900K vs. $200K is a big difference. I can easily take the $200K reno in stride. $900K rebuild alters my finances. But, you get what you pay for, right . . .?
You write that you have a mid seven figure portfolio and that you've built a custom home before. Sounds like you can do what you want and know what you are getting into. Would you and your spouse enjoy the process of building the new home as a fun activity? Design, materials, kitchen/bath, materials? If its something you'd enjoy doing (as a hobby even) then it seems like you certainly could do it. If, on the other hand, it would be a hassle and cause of marital stress -- why put yourselves through it?
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Re: Should I tear down my house?

Post by teen persuasion »

Don't destroy a lovely old house just because you want a new house. Especially if you don't intend to stay there forever.

Sell the old house unremuddled to someone who prefers older houses, and buy yourself the new house you want.
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Re: Should I tear down my house?

Post by Outer Marker »

stan1 wrote: Mon May 10, 2021 5:46 pm ... Would you and your spouse enjoy the process of building the new home as a fun activity? Design, materials, kitchen/bath, materials? If its something you'd enjoy doing (as a hobby even) then it seems like you certainly could do it. If, on the other hand, it would be a hassle and cause of marital stress -- why put yourselves through it?
Yes, it would be a lot of fun, and we'd enjoy doing it. I've always been a saver and the idea of spending that kind of money I don't need to is a little troubling. But, the economics and number of tear downs in the neighborhood suggest that it's economically rational. Since I've decided to keep working even though I don't have to, this would be a "nice to have" major splurge.
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Re: Should I tear down my house?

Post by Outer Marker »

teen persuasion wrote: Mon May 10, 2021 7:10 pm Don't destroy a lovely old house just because you want a new house. Especially if you don't intend to stay there forever.

Sell the old house unremuddled to someone who prefers older houses, and buy yourself the new house you want.
Yes! That is a source of much guilt - but the reality is the next owner is probably going to tear it down. If it's them or me, I might as well turn a profit on it vs. a developer. I'd do a better job, and I won't build an aircraft carrier sized house up to the property line. It will be eco friendly, 100% solar, etc. Very appealing to me and my fiancee.
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Re: Should I tear down my house?

Post by Wiggums »

I’m not clear on the financing. You owe $700k on the current home. Do you need to pay that off before knocking down the existing home?

Will you need a construction load to start the 900k home?
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Re: Should I tear down my house?

Post by JoeRetire »

Outer Marker wrote: Mon May 10, 2021 5:24 pm I'm more struggling with the numbers. $900K vs. $200K is a big difference. I can easily take the $200K reno in stride. $900K rebuild alters my finances. But, you get what you pay for, right . . .?
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Re: Should I tear down my house?

Post by retired@50 »

Outer Marker wrote: Mon May 10, 2021 4:09 pm
123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six. You can't buy anything around here, and I'd have exactly the custom build I want. I just hung up on two cold calls today from developers wanting to buy my house. Within view of my office window, 3 of the 5 neighboring lots are currently tear downs. I think the value of the land has eclipsed the useful economic life of these older homes. But I feel guilty about tearing it down.
The red phrase above made me laugh out loud. I used to work in the lumber industry and I never saw a whole house build come in "on-time".

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Re: Should I tear down my house?

Post by Outer Marker »

Wiggums wrote: Mon May 10, 2021 7:42 pm I’m not clear on the financing. You owe $700k on the current home. Do you need to pay that off before knocking down the existing home?

Will you need a construction load to start the 900k home?
I'm not clear on that either! It's an important consideration. I'd like to keep the low interest $700K loan, and perhaps finance a portion of the rest. I've got about $250K sitting in cash, and will shortly realize another $200K from the sale of an inherited property. So, I'd need to come up with $500K to do the project, assuming I can keep the loan in place.

I'm going to call the lender tomorrow and see if they can waive/authorize me to tear down the house without paying off the loan and getting an entirely new construction loan. Probably wishful thinking. The cost of money is a significant factor. I'd also have to displace my basement tenant who offsets 20% of the current mortgage payment.
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Re: Should I tear down my house?

Post by Mr. Rumples »

Sell and move. In five to ten years, from what you described, there will be more traffic, more people and therefore less conducive to single home living. It takes a special person to want to buy an expensive house surrounded by high-rises.

A tear down might me additional unforeseen costs: lead and asbestos.
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Re: Should I tear down my house?

Post by F150HD »

+1 sell the home (to someone who'd appreciate an old home) and buy new somewhere else.
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Re: Should I tear down my house?

Post by finite_difference »

Outer Marker wrote: Mon May 10, 2021 7:19 pm
teen persuasion wrote: Mon May 10, 2021 7:10 pm Don't destroy a lovely old house just because you want a new house. Especially if you don't intend to stay there forever.

Sell the old house unremuddled to someone who prefers older houses, and buy yourself the new house you want.
Yes! That is a source of much guilt - but the reality is the next owner is probably going to tear it down. If it's them or me, I might as well turn a profit on it vs. a developer. I'd do a better job, and I won't build an aircraft carrier sized house up to the property line. It will be eco friendly, 100% solar, etc. Very appealing to me and my fiancee.
If you do build a new house, hire an architect and build something tasteful. That won’t be cheap. Also, lumber costs will not come down for some months.

Old houses have character and generally look attractive. Modern McMansions tend to look soulless and I don’t think they will age well.
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Chicken lady
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Re: Should I tear down my house?

Post by Chicken lady »

It sounds like you've made your decision but want validation. I'd say you've gotten it here.
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Re: Should I tear down my house?

Post by WhyNotUs »

Outer Marker wrote: Mon May 10, 2021 7:13 pm [ But, the economics and number of tear downs in the neighborhood suggest that it's economically rational. Since I've decided to keep working even though I don't have to, this would be a "nice to have" major splurge.
Based on what you have said about changes in your area, your existing home will appreciate more as is than doing anything. The next buyer might be a condo developer or someone doing land assemblage. If that seems true to you, then the money you spend will not help your bottom line in 5 years.
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Re: Should I tear down my house?

Post by Stinky »

Chicken lady wrote: Mon May 10, 2021 8:42 pm It sounds like you've made your decision but want validation. I'd say you've gotten it here.
Huh?

Seems to me like OP has received a number of “Warning! Warning! Danger! Danger!” posts here.

I don’t sense much validation of his idea.
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Re: Should I tear down my house?

Post by Orange_Philosophy »

Material costs are out of control. I wouldn't build a treehouse right now much less a custom home. For example: 4x8 7/16" OSB was about $7 and change before covid. Right now that's a $48 sheet of lumber and prices continue to rise. Again, why on Earth would you want to build ANYTHING right now? Wait out the craziness. If you can't stand it, sell it and buy something else. If it were me, I'd wait until it appreciates some more, sell it, and move to a lower cost structure and pocket the diff. But then I'm cheap.
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Re: Should I tear down my house?

Post by chazas »

Well, I did a teardown and new build in 2007-8 on the Orange Line in Arlington. Ex was an architect so the design was great. But even with a tight budget and making the most of design over expensive materials we were at 2.2ish all in and the build took a year and was an awful experience. The place would be worth in the 3s now but life changes led to selling when we broke just about even. The financial burden during post crisis comp cuts was very uncomfortable in the interim.

I wouldn’t do it again. And I think your cost and time estimates are way off.
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Re: Should I tear down my house?

Post by leeks »

Unless the lot and neighborhood comprise your ideal location for the rest of your life, don't destroy a 100 year old home (assuming it is the kind that could last another 100 years if well maintained). What a waste of those quality old materials at time when mediocre modern construction materials are in short supply anyway. If it is your forever location, fine, do what makes you happy. But if you won't be there forever, I don't see how it makes sense.
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Re: Should I tear down my house?

Post by chazas »

leeks wrote: Mon May 10, 2021 10:47 pm Unless the lot and neighborhood comprise your ideal location for the rest of your life, don't destroy a 100 year old home (assuming it is the kind that could last another 100 years if well maintained). What a waste of those quality old materials at time when mediocre modern construction materials are in short supply anyway. If it is your forever location, fine, do what makes you happy. But if you won't be there forever, I don't see how it makes sense.
I don’t think OP should build but it’s a misconception that all old construction is worthwhile just because it’s old. Modern construction methods build a much more comfortable and efficient house. And old can be just as ugly as new.
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Re: Should I tear down my house?

Post by leeks »

chazas wrote: Mon May 10, 2021 10:56 pm
leeks wrote: Mon May 10, 2021 10:47 pm Unless the lot and neighborhood comprise your ideal location for the rest of your life, don't destroy a 100 year old home (assuming it is the kind that could last another 100 years if well maintained). What a waste of those quality old materials at time when mediocre modern construction materials are in short supply anyway. If it is your forever location, fine, do what makes you happy. But if you won't be there forever, I don't see how it makes sense.
I don’t think OP should build but it’s a misconception that all old construction is worthwhile just because it’s old. Modern construction methods build a much more comfortable and efficient house. And old can be just as ugly as new.
I get there is a lot of crappy old stuff in the US housing stock. And sure, new stuff could be very good (at that price range).

It is the $1.3 million current value that makes me assume the existing house is desirable as is ("nice" as the OP described).
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Re: Should I tear down my house?

Post by chipperd »

OP: Based on your description and replies it seems the area your current home is in is becoming less desirable for those looking for a single family home in a young kid friendly area. I know you didn't state your age, but you are engaged and wondering if kids/family is in your future?
If no to the family question, then sell and book the 200k+ profit. Move on to something that you can tailor to your needs with less resale risk. You don't want to be one of the last single family homes in your immediate area. With lumber costs and supply chain issues right now, you are looking at a major headache for many, many months to either refurbish or rebuild.
If yes to the family question then sell to find something with a large yard, great schools and a neighborhood in which your future kids can jump on their bike to go to a friend's house down the street. When it comes to suburbia living in a safe area with amazing schools, your future kids and wallet will thank you.
Either way, add me to the chorus of sell, sell sell.
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Re: Should I tear down my house?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (mostly financial questions - rebuild / upgrade decision).
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Re: Should I tear down my house?

Post by HomeStretch »

Does the zoning on your property and the property(ies) between you and the 20-story building you can see from your front porch allow commercial buildings? If yes, is it probable/likely that your neighbors will sell to a commercial developer offering $$$ for the land in the near future?

You might go through the extensive rebuild just to find out you will be living next door to the newest 20-story building (and living through the construction of it). Or you might find it more profitable to sell to the commercial developer than rebuild.
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Re: Should I tear down my house?

Post by chazas »

leeks wrote: Tue May 11, 2021 12:51 am
chazas wrote: Mon May 10, 2021 10:56 pm
leeks wrote: Mon May 10, 2021 10:47 pm Unless the lot and neighborhood comprise your ideal location for the rest of your life, don't destroy a 100 year old home (assuming it is the kind that could last another 100 years if well maintained). What a waste of those quality old materials at time when mediocre modern construction materials are in short supply anyway. If it is your forever location, fine, do what makes you happy. But if you won't be there forever, I don't see how it makes sense.
I don’t think OP should build but it’s a misconception that all old construction is worthwhile just because it’s old. Modern construction methods build a much more comfortable and efficient house. And old can be just as ugly as new.
I get there is a lot of crappy old stuff in the US housing stock. And sure, new stuff could be very good (at that price range).

It is the $1.3 million current value that makes me assume the existing house is desirable as is ("nice" as the OP described).
In the close in DC suburbs close to Metro and development for that amount probably a nice and livable but in no way spectacular property.
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Re: Should I tear down my house?

Post by chazas »

[deleted, double post]
Last edited by chazas on Tue May 11, 2021 7:32 am, edited 1 time in total.
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Re: Should I tear down my house?

Post by sls239 »

Is the reno worth $100K to you for the time you are likely to have it?

If so, I'd be inclined to recommend sticking with that and leave the developing to the developers. It is OK to just spend the money if you have it and it is something that you will be happy with.
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Re: Should I tear down my house?

Post by chazas »

HomeStretch wrote: Tue May 11, 2021 7:17 am Does the zoning on your property and the property(ies) between you and the 20-story building you can see from your front porch allow commercial buildings? If yes, is it probable/likely that your neighbors will sell to a commercial developer offering $$$ for the land in the near future?

You might go through the extensive rebuild just to find out you will be living next door to the newest 20-story building (and living through the construction of it). Or you might find it more profitable to sell to the commercial developer than rebuild.
Unlikely in the close in DC suburbs, things in residential streets just don’t get rezoned to commercial easily. There’s a lot of development around metro stations where zoning is commercial and there are larger buildings, but there’s a quick density/height transition to the nearby SFH neighborhoods.
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Re: Should I tear down my house?

Post by Outer Marker »

Thanks for the additional replies and input. I'm still very much on the fence, but leaning in the direction of the reno vs. rebuild. It just goes against my grain to spend that much on consumption, even if I can afford it. I really don't need a new 5 BR house for 2 people. I'll probably take a small loss on the $200K reno, but it's worth it for the time I'll be in it. The rebuild might make more money in the long run, but it's a big check to write at once. I think it's been said that if you're agonizing over a right or wrong financial decision, there is probably no right or wrong answer.

Property values here will go nowhere but up. It's not like the neighborood is being run over with commercial development. I can see the tall buildings from my house, especially in the winter when the leaves are down. But, its a 5-10 minute walk. We have a very strong and political neighborhood association, and there's no way that kind of development would ever be allowed on my neighborhood's side of the main avenue. It's all $1.1 to 2.5M single family homes. Mine is one of the cheapest in the neighborhood, but that's probably a good place to be.
Jablean
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Re: Should I tear down my house?

Post by Jablean »

Well I'll come in and say rebuild.
#1 - houses in your neighborhood are being torn down and rebuilt so you won't be out of place and there don't seem to be any historical reasons to keep it as is.
#2 - You don't want to move elsewhere as it's nextdoor practically to your worksite
#3 - You've built before and you and your partner know you would enjoy working out the design details
#4 - It doesn't really sound like the remodel will fix all the things you don't like
#5 - You have the finances so this decision is not about the money
#6 - You don't have the fanciest house on the block now and you don't plan on putting in the fanciest new house so you should keep your value
#7 - Why remodel a house that is likely to get rebuilt when you sell it in 5 years, either go big or don't go at all
#8 - You've vetted your builder
#9 - You probably won't get any money back for the 200,000 you spend on remodel - the house price is either going to go up or it's not.
#10 - I found one place where a mortgage broker said "why tell the lender what you are doing?" Not sure I'd recommend that as it also said it could be grounds for foreclosure.
Prahasaurus
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Re: Should I tear down my house?

Post by Prahasaurus »

You have a piece of history (100 year old home!) and you want to destroy it to rebuild another cookie cutter modern home to keep up with your neighbors? Seems crazy to me. Plus all the stress of rebuilding, moving out for a year, etc. Why? And you only plan to be there for 5 more years? It almost seems like you're bored and looking for a project.

Is that super modern shiny new home really going to make you happier? 2x happier?
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anoop
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Re: Should I tear down my house?

Post by anoop »

Start a gofundme for restoring a historical property. :mrgreen:

I don't think you should tear it down. Old, well-maintained homes have a bit of a charm. I also think you may be surprised for what it sells for in these times. If the area is as desirable as you say and you're getting calls, you could probably sell it for a few 100k over listing.
chipperd
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Re: Should I tear down my house?

Post by chipperd »

Outer Marker wrote: Tue May 11, 2021 3:25 pm Thanks for the additional replies and input. I'm still very much on the fence, but leaning in the direction of the reno vs. rebuild. It just goes against my grain to spend that much on consumption, even if I can afford it. I really don't need a new 5 BR house for 2 people. I'll probably take a small loss on the $200K reno, but it's worth it for the time I'll be in it. The rebuild might make more money in the long run, but it's a big check to write at once. I think it's been said that if you're agonizing over a right or wrong financial decision, there is probably no right or wrong answer.

Property values here will go nowhere but up. It's not like the neighborood is being run over with commercial development. I can see the tall buildings from my house, especially in the winter when the leaves are down. But, its a 5-10 minute walk. We have a very strong and political neighborhood association, and there's no way that kind of development would ever be allowed on my neighborhood's side of the main avenue. It's all $1.1 to 2.5M single family homes. Mine is one of the cheapest in the neighborhood, but that's probably a good place to be.
It's going to come down to: what is the logical approach vs what is the emotional approach. Those who have supported keeping an old home typically post an emotional reason, whereas those who cite your numbers are supporting you using the other side of your brain on this one and approach this question you have posed from a logical perspective.
As an outsider looking in, it's easy for me to use the logical side of my brain. Given your fondness toward expressions (yes, there is an answer that will reveal itself over time as to which was the best decision for you. How's this one? Time answers all questions), I suspect the emotional aspect of your dilemma will win out.
Either way, I'm sure at some point you will be pleased with your decision.
Best of luck! :sharebeer
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galving
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Re: Should I tear down my house?

Post by galving »

Outer Marker wrote: Mon May 10, 2021 3:56 pm So, I have a nice 100 year old house in a highly desirable "urban" suburb of Washington DC. New 20 story office buildings and condos are going up within view of my front porch. Just far enough away. Close to the metro line.

I paid $1.1M for it a few years ago, and its probably worth $1.3M as it sits. I'm about to start on a major 1st floor renovation to make it more comfortable for our needs, and upgrade to all Wolf/Subzero appliances, etc. The reno will cost about $200K and it will be nice. But, I can't see the old house being worth more than $1.4 - so basically booking a $100K loss. There will also be a lot of lingering issues, like the too narrow staircases, and funky old wiring, etc.

On the other hand, if I tear it down, it will cost me $900,000 to rebuild and new construction houses are going for $1.8-2.2M. I think I'd at least break even, probably better. If I financed it, it would take me from cashflow positive to cashflow negative, assuming the bank would let me do it. Or, I could pay cash and have to pay some capital gains on a mid seven figure portfolio.

I kinda want the new house, as does my fiance. But, way more space than we'd need since I'm nearly an empty nester on the first go around, and we probably won't have another child on the 2nd go. I plan to sell the house in the next 5-10 years and either retire or be a "trailing spouse" in the foreign service. What to do . . . ?

Also, I'm wondering if I can somehow keep my existing 2.15% 15 year $700K mortgage and roll it into the new house. I can't find money that cheap anymore and would hate to give up that great rate. The land is worth more than the loan, so I'm wondering if the lender can waive me tearing down the house and take a security interest in the new one, once built.
Economics probably say tear dow/rebuild is preferred but be sure to include the annoyance premium.
Often I've found that paying up for an item (especially one that you see/use everyday) is preferable than the low cost alternative.
Over time all things can be fixed/updated. Plumbing re-piped or electrical upgraded.
I'd continue on your remodel, and fix items as targets of opportunity.
egrets
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Re: Should I tear down my house?

Post by egrets »

Don't destroy an old house and all the irreplaceable character and features it has. Sell it to someone who will respect it and get a new house somewhere else for yourselves.
chazas
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Re: Should I tear down my house?

Post by chazas »

egrets wrote: Wed May 12, 2021 5:35 am Don't destroy an old house and all the irreplaceable character and features it has. Sell it to someone who will respect it and get a new house somewhere else for yourselves.
I really, really disagree with this kind of reactive statement. Not every old house is worth saving. And there was something there that got replaced before. Especially in the DC area in the close-in suburbs, where there are a ton of characterless tract homes that got thrown up rapidly and cheaply after WWII.

When I did a teardown in Arlington in 2007-8, the 100 year old place that was on the lot was single story, no foundation (basically up on blocks), no character, the only inside bath was in a lean-to addition just next to the stove in the kitchen. Walls were so flimsy and thin you could push on the inside and see the outside flex. I had preservation minded friends who begged to be able to walk through and “save” things. No one took anything or said a word about it after they saw it.

Don’t get me started on historic district regulations that fixate on something looking like it was frozen at a particular moment in time.
rascott
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Re: Should I tear down my house?

Post by rascott »

To answer the question on the financing....I believe it would be very unlikely the lender would keep the existing financing in place. You can ask, but it's an entirely different risk profile for land only loans....

Lender really has zero incentive to do this either.... even if they could.
txgolfer_19
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Re: Should I tear down my house?

Post by txgolfer_19 »

As a few others have noted, please have things repriced before committing to any large build or reno right now. Lumber has more than tripled in the past year, with a lot of that increase being in the last few months. I have multiple neighbors building that have been delayed due to inability to get fencing, brick, doors, etc. Many appliances are on back order for 6 months. I'm seeing this in my commercial development clients' projects as well, but to a much larger extent (multimillion dollar budget increases from lumber alone). Not trying to dissuade you on either option, but be prepared for higher costs and delays.
OldBallCoach
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Re: Should I tear down my house?

Post by OldBallCoach »

Well I am 11 months into a 5 month house build...getting anything right now is a giant pain in the ass...lucky for us most of the lumber and steel had been bought a year ago so thats fine...electrical parts, plumbing parts...anything....its all crazy...we are coming in about 22% over budget just happy as hell to be getting it all done...so buy a high end appliance...again...CRAZY...if you can wait a while I think I would...we have put a vacation home build in Montana on hold for now...might just cash in the land value increase and call it a day...wish you the best...but...be careful about taking the money and running...their might be a rope tied to it...
CoastLawyer2030
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Re: Should I tear down my house?

Post by CoastLawyer2030 »

Outer Marker wrote: Mon May 10, 2021 4:09 pm
123 wrote: Mon May 10, 2021 4:00 pm Wouldn't it be simpler to just sell your present home and buy something that you want?

If you go the teardown and rebuild route you're going to have to live somewhere else for a likely minimum of at least a year while that work is done.
From the time the permits are issued to move-in is 4 months per my builder; I'll plan on six. You can't buy anything around here, and I'd have exactly the custom build I want. I just hung up on two cold calls today from developers wanting to buy my house. Within view of my office window, 3 of the 5 neighboring lots are currently tear downs. I think the value of the land has eclipsed the useful economic life of these older homes. But I feel guilty about tearing it down.
I didn't have time to read the entire thread; but I represent three builders in my law practice, albeit in a different location. Someone quoting you four months is off their rocker, especially with current supply chain shortages. This is such an insane estimate that it would make me significantly question their price. If it is as off as their timeline, you can book a lot more than $900k on your build.

When it comes to selecting a general contractor to build a new home, you can choose one of two builders -- (1) a builder that is going to shoot it to you straight and give you honest expectations of cost/time; or (2) a builder that gives wildly inaccurate timelines and cost estimates.

Just my two cent warning from afar.
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