For the next eighteen years, once a day in the United States, a Baby Boomer will turn 65. It will take almost two decades for this shift to occur because that epic post-World War II generation is 77 million strong. This transition has wide ranging socio-economic significance, not the least of which is its effect on the housing market in the country. Older homes on prime lots will be coming available in record numbers as the Boomers look to downsize, likely leading to a sharp escalation in the number of “tear downs” in established neighborhoods.
The decision to buy a home purely for the lot on which it sits is always predicated on externals. Older homes tend to be closer to locations of importance to families, whether those are parks and schools or retail venues and business centers. Additionally, these are the neighborhoods with character — the ones where the trees have achieved their full growth and a sense of establishment and permanence have long since settled in. Those are not qualities to be had in new developments where the grass struggles to live and your 10-year-old is taller than the “tree” in the front yard.
Does tearing a house down make good economic sense? The short answer is, “It can.” Like anything else in real estate, a tear down is a matter of running the numbers. When you take an older home down to the dirt, you’re looking at demolition and removal costs in the neighborhood of $20,000 to $25,000 on top of whatever you paid for the house and before construction costs on a new dwelling. There may also be unexpected expenses, like asbestos abatement, a common necessity in post-World War II housing, which runs $3 to $5 per square foot.
In many cases, a “tear down” may actually be a massive remodel in which the house is stripped to the studs, the floor plan re-conceptualized, and a new “skin” put on the dwelling. The best thing you can do when contemplating working over an old home is to hire one or more construction consultants to give you their opinion about the condition of the existing structure and to estimate the cost of the changes you have in mind. Only with solid estimates (including time and labor) can you intelligently decide if the math involved in a tear down works for you.
Often home buyers discover that while the initial cost of buying and rebuilding may be slightly higher than simply purchasing a new house, what they gain in appreciation based on location and land value is well worth the investment. The important thing to remember is that increasingly older homes will be available on the market and that they are well worth your consideration as a prospective buyer.
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