How do I calculate an offer on a tear down

Question

I found a house that’s been abandoned for a while and needs to be torn down but my question is this, how do I calculate an offer ? Is it the land value ? I’m guessing I deduct the cost of demo and possibly price to rebuild to get ARV?

Allison Meggison · Answer

@Steve B.

That’s what I’m trying to figure out

Steve B. · Answer

@Allison Meggison what is “price to rebuild to ARV?”

Kenneth Garrett · Answer

@Allison Meggison

I can’t speak on cost in your area.  In my area demo cost is approximately 10-15K.  New construction cost varies on many factors based on finishes both interior and exterior.  I would say $150 per square foot is a relatively reasonable number.  In some cases because foundations are all done at the same time and buildings share common walls you might get that number down to about $125 per square foot.

Allison Meggison · Answer

@Kenneth Garrett

Yea I talked to the planning and inspection town office and they said you could put about three townhomes up . But idk how to calculate new build or demo

Kenneth Garrett · Answer

@Allison Meggison

Check the zoning on the property as well to make sure the lot is large enough to build townhomes on it and can meet the setbacks.  Make sure townhomes are allowed in that particular zoning district.

Allison Meggison · Answer

@Kenneth Garrett

I’ll have to find out about what the jurisdiction requires. I think the foundation would

Have to go because ideally, the end buyer will probably want to put townhomes up instead of another single family

Kenneth Garrett · Answer

@Allison Meggison

I would calculate the land value and deduct the cost of the demo.  On the demo make sure you understand what needs to be removed. Some jurisdictions require all foundations and footings be removed while others don’t.  Are you going to reuse the foundation or build a new one or something in between.