COMPLETE TEAR DOWN!!!

16 Replies

Have anyone ever invested in a complete tear down property? I know you're essentially buying the lot/land but how frequently do people outside of a huge corporation demo an entire home then develop on the land? Interested in hearing testimonies from you all.

we do it a few times a year

its very tough.. some areas land has negative value.. IE you cant build a home for as cheap as you can buy existing there fore land is negative value.. you see that in lower end areas .

in higher end areas were you can sell new construction for 500k and up its quite often tear downs work.

but you still have to get it over to the land owner that their 100k lot with a tear down house you can only pay 65 to 80k for it because depending on age it will be 20 to 35k to tear it down and haul it to the dump.. better to have a fire accidently.. ::))  not advocating that at all but.. you have to deal with Asbestos's and lead paint in these day and age and that can cost an arm and a leg..

I did it once.  Bought a house on three lots.  Bought a 16' Car Hauler Trailer, and a tow rope and tore down the majority of the the house myself.  Was a ton of fun/stress releiver.  Nothing like swinging a sledge hammer or tearing down a wall by tying a tow strap through a couple of windows, hooking it up to the rear frame of your truck (or jeep) and slamming the gas.

I paid a guy to finish it up (before the snow flew) and sold the property on a seller financed mortgage at 9%.  If I remember right, I made $20k on that deal - and the buyer built a house on the lot and sold it for $379k

Before I did it again, I would look to see what water taps costs (most places it's about $35k for City Water) and go from there.  Your mileage may vary.

@Jay Hinrichs exactly... There's a home I'm looking @ and it's a complete tear down and the seller is asking for 850K. The zoning is also off and I told her that it would never sell at that price but she is completely set on it. The lowest she said she'll go is 800K and I was like "we'll keep in touch". She seems very motivated to sell but she's being very unrealistic. I don't know the ins and outs of the tear down rebuild process but I definitely know it's not cheap. I appreciate your feed back.

Originally posted by @Quinton Childs :

@Jay Hinrichs exactly... There's a home I'm looking @ and it's a complete tear down and the seller is asking for 850K. The zoning is also off and I told her that it would never sell at that price but she is completely set on it. The lowest she said she'll go is 800K and I was like "we'll keep in touch". She seems very motivated to sell but she's being very unrealistic. I don't know the ins and outs of the tear down rebuild process but I definitely know it's not cheap. I appreciate your feed back.

 it would need to be in wriglyville or some other very high priced area of Chicago to make that work.

wrt water and sewer, if it’s an old knockdown check and see what the city requires for new service... sometimes they cover 80% of the new service. ... but only for the old house! I know a few guys who’ve replaced the sewer/ water line, and applied for the demo permit the next week. Saved them ~$10k

Originally posted by @Jay Hinrichs :
Originally posted by @Quinton Childs:

@Jay Hinrichs exactly... There's a home I'm looking @ and it's a complete tear down and the seller is asking for 850K. The zoning is also off and I told her that it would never sell at that price but she is completely set on it. The lowest she said she'll go is 800K and I was like "we'll keep in touch". She seems very motivated to sell but she's being very unrealistic. I don't know the ins and outs of the tear down rebuild process but I definitely know it's not cheap. I appreciate your feed back.

 it would need to be in wriglyville or some other very high priced area of Chicago to make   that work. 

Ok this makes sense, this particular property is in Bucktown. Really affluent neighborhood these days.

Originally posted by @Quinton Childs :

@Ed E. That does sound like a lot of fun and sounds impossible for me to do here in Chicago. Really good story, how long of a process was that for you?

 I did it over the summer a few years ago and had someone finish it off for me in the early Fall before the snow flew.  I also offered the local fire department to tear it down - they said they couldn't because of environmentalists.  I'm sure Chicago has stricter restrictions than Leadville, Colorado (back in 1999).

Hey @Quinton Childs thanks for starting the thread! I have not done a "total tear down" but I did take a property down to the studs and new foundation and rebuilt a 4 unit in Chicago, which I am now in the process of selling after a few years. 

Now this year, I closed on a vacant lot and will be building a new construction 4 unit on that property and I am not a huge corporation by the way. Teamed up with a buddy of mine, and I have the same contractor I used for the last property and hired an architect. The architect was mainly due to us having to appeal for a zoning change. 

It all depends on the numbers my friend! If the projected sales price or rental income makes sense for the cost to build, then yes. If you are overpaying for the land itself, it will not make sense. 

As a new home builder here in Chicago - 99% of our projects have been tear-downs. This is true of the majority of builders here in Chicago and none of us are big corporations. There is very little vacant land in great neighborhoods in Chicago, so we refer to all tear-downs as "lots" because in those neighborhoods you are buying the land, not the structure. New construction is a much more involved process than a renovation from a zoning, permitting and inspections viewpoint at the very least. The actual construction is also a whole other animal. 

Buying at $850K the comments above are correct - unless you are looking at a very large multi-unit, you will need to be in Lincoln Park or a similar area to make that deal work. Your first stop is a zoning attorney and/or an architect to review the current zoning and determine what you can build there, etc. Regardless of what this seller wants, the numbers have to work.

The City of Chicago Building Department has its own set of rules and its own code book - what flies elsewhere is not always going to work here (i.e. you are not going to tear that house down yourself - although how fun would that be?). Before you waste too much time, find out the what you can build on that piece of property with the current zoning and then see if the numbers work! 

Originally posted by @Quinton Childs :

@Jay Hinrichs exactly... There's a home I'm looking @ and it's a complete tear down and the seller is asking for 850K. The zoning is also off and I told her that it would never sell at that price but she is completely set on it. The lowest she said she'll go is 800K and I was like "we'll keep in touch". She seems very motivated to sell but she's being very unrealistic. I don't know the ins and outs of the tear down rebuild process but I definitely know it's not cheap. I appreciate your feed back.

 Where is this property located?  There are not a lot of areas in Chicago that will justify 800K for a tear down.  

Years ago, I heard a very general rule that in Chicago, if comps are 2.5 times the cost of the tear down, it can be worth it.

So if comps are 2.5 million, that could support an 850 teardown. There certainly are some streets in LP which can do that. But very few. Of course that is rebuilding single family. If somehow you are replacing with mid-rise, multi-family that changes the math.

In my neighborhood, the math is tear downs are 350-450 and new is 1.5 to 2.3 or so.