I'm wanting to determine whether or not to Rehab vs Build Anew

2 Replies

Hello everyone, I'm a newbie to real estate investing. I currently have a home sitting on a little over quarter acre of land. However, a leaking roof has caused considerable water damage to the floors and walls inside of the house. (Side Note: There's also an underground basement inside the house)

My Question: Would it be cost effective to rehab the current structure ( gutting the inside and fixing up the outside ) or to tear down the house and build a tiny home of one form of another in it's place?

I get this question all the time, and it's REALLY difficult to answer. It's impossible to answer in your case - because we don't know the size or condition of the existing home. However, these points (below) tend to tell me what to do with a structure:

1) Are the "bones" (wood framing) of the home worth saving? Generally NO if they a) have extensive rot or b) were poorly/lightly built in the first place. 

2) Is the home worth saving due to location, size, architectural features, etc? 

3) Is the cost of the renovation cheap enough vs the after repair value (ARV)?

4) If you want to change (add on to) the property, can the existing home accept the addition?

A couple of examples:

1) A client wanted to lift and add another level to a single story coastal home. This home was in a flood zone, it was old, and lightly built, although in good condition. It was more affordable demolish and rebuild. 

2) A client wanted to renovate an existing 2 family home that was a massive 1800's farmhouse. This home was built from very heavy duty timbers, had nice architectural detailing, and very high ceilings. The home also had a rough exterior including damaged and rotted siding. We kept the home, and repaired the exterior. The home's frame / bones were in good condition. 

As a side note, I don't believe that a "tiny home" is an investment. These are trailers, not buildings. A small home can be nice and a good investment. 

Another note: if the home is rotting above, and the foundation is damaged below, there's little left to save. 

David thanks for the enlightenment. I'm very new here and don't want to violate any of BP's terms. Could I share more details/info with you about the property, like the address and you could have a look yourself? Also are you familiar with the tiny home concept binishells? This is what I was considering replacing the damaged structure with.

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