Atlanta deal, tear down or fix up...?

Question

We are looking at a potential property to flip, but the rehab is so extensive I'm trying to determine if tearing down and building new would be a better option for this one.

We have run our numbers for both alternatives, but I was curious what Atlanta area investors are paying their contractors (price/sq.ft) to do a complete "gut down to the studs" rehab with mid-high grade finishes.

And on the other hand, what should you expect to pay in the Atlanta area for a new build with mid-high grade finishes (price/sq.ft.)?

Any insight is much appreciated!

Rick Baggenstoss · Answer

I've been spending $55/sf for gut rehabs and heard more like $100/sf for new construction.  J's costs are enviable, but they're not what most of us can expect.

Agree with @Michaela G. , work backwards from the ARV and see which makes the most sense.  Also consider, rehab brings more risk, but new construction takes longer.

J Scott · Answer

For mid- to high-end finishes?  What I would pay...give or take:

Gut rehab - $40/sf

New construction - $65/sf

Not saying you'll get those prices (could be higher or lower given you probably have different contractors, different design style, different definition of mid- to high-end finishes, different material suppliers, different negotiating skills, different level of experience, etc), but that's about what I expect...

Brandon Hardy · Answer

I am finding closer to the $100/sf for new construction as well, @Rick Baggenstoss.

Thanks for the insight all!

Blake Shaw · Answer

Hey Brandon, We must be in close proximity if you are in Chamblee and I'm in Brookhaven. The game in my area is tear down/rebuilds and there is very little remodeling happening.  Other parts of Atlanta however, like Morningside, will have a much higher percentage of remodels or additions compared to new construction.  To me it really depends on what sub market in Atlanta you are talking about and what buyers in that area are expecting.

Michaela G. · Answer

@Joshua Jarvis , I try to eliviate your confusion:

There are areas in Downtown Atlanta, where you can buy houses for 10K, but the cost to fix them up will make your invested amount higher than what you can buy a renovated house for. Or if a new construction costs you 100K and houses only sell for 60-70K in the area, then it's not worth looking at lot value.

Joshua Jarvis · Answer

With new construction you're able to break out of the market slightly and be compared to new construction.  In Atlanta, I'm more concerned with appraisal values then I am finding a buyer willing to pay fair market.    Although I found the 2nd part of Michaela's post confusing, the first part makes sense to me.  What's New construction going to sell for vs rehabbed and run the budgets on both of those.   New Construction is going to take longer too, so keep that in the budget as well.  Good luck!

Michaela G. · Answer

I would work it backwards: What are new construction comps in the area and what are renovated comps?

Atlanta has very different neighborhoods and what makes sense in one area, may not work in another.

There are areas where you can buy a major fixer-upper for 10K and a rehab will cost you 50K and the house will be worth 40K after, and new construction will be worth 70K, but cost more to build.

Brandon Hardy · Answer

Thanks for the quick response J.  That is helpful information.

Really enjoyed your books, by the way!

Atlanta deal, tear down or fix up...?

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