Demolish a rental property & build new SFH on lot to sell
I currently own a single family home in Dallas, TX. It is located in a popular area near downtown Dallas. We have owned it for 11 years, and it is currently being rented by the same tenant for the past 6 years. When my husband and I moved out of the property, there were a handful of homes being scraped and HUGE homes being built on the land. Six years later, there are tons of huge homes in our small neighborhood and they sell quickly. The homes being built are around 3,400 SF and are selling for about $206-$210 SF. We used to get letters from investors and builders interested in the property all the time. The home is old, built in 1940 with original plumbing and wiring. The lot is 8,189 SF and the home is 1,008 SF. The property does not generate any cash flow, but we have a good amount of equity in the house.
MY QUESTION: Should we sell our home and use the cash to purchase other investment property? Or should we demolish the home and construct a new home and sell it in hopes of a bigger return? Or do nothing and keep renting it. We are just afraid, that our small home will be surrounded by the larger sized homes in the coming years and we have lost our window of opportunity. I was wondering if anyone who has done this in the past give me insight and advice on what to look for, ask, maybe number calculations that I should look at. We are meeting with a couple of builders in the area in the coming weeks, to finalize more accurate numbers to make our final decision. Also, more of an accurate timeline to see how long the process will take. This is only my second post, so I am pretty sure I have left out needed information.