- - Thursday, October 25, 2012

Is it better to renovate or rebuild? This question is not as simple as it may appear — financially or logistically. Real estate professionals agree that each situation is unique, but they offer some rough guidelines to help make the decision.

“If the houses in your grid are selling for two to three times the value of the house you live in, the economics work for a tear-down,” said Brian Hickey, president of Teardowns.com, an online marketplace for the transactions of redevelopment properties. “If the Realtor is telling you that your home will sell for $400,000 but the neighbors have homes worth $1.2 million, you’re a good candidate for a tear-down.”

Mike Theide Jr., project manager and part owner of Bethesda Contracting in Chevy Chase, pointed out that the most sought-after renovation of homeowners in the Washington area is a two-story addition in which the kitchen and/or living room is expanded on the first floor and a master suite is built upstairs.

“Very roughly speaking, these cost between $200,000 and $400,000,” he said. “Obviously, you can’t build a new house for that amount, but if you want to go much more beyond that in terms of renovations, it may make sense to rebuild.”

Architect Susan Pierce, founder and co-owner of Commonwealth Home Remodelers Inc. in Vienna, agreed that everyone wants a new kitchen and master suite.

“Those can be added onto the existing house,” she said, noting that once renovations start exceeding $450,000 or $500,000, homeowners should start to consider tearing down and rebuilding. “A brand-new house doesn’t cost much more than that.”

The real estate professionals agree that renovations often cost more per square foot than new construction. Ms. Pierce said economies of scale come into play with new construction and that it takes more time and care to undertake a remodeling project.

“With renovations, you must demolish what you have very carefully versus going in with a bulldozer,” she said.

Mr. Theide pointed out that working around older structures can be difficult and expensive.

“You have to tie into the existing systems, and you can run into problems — usually with the plumbing and heating systems — in terms of working with radiators and drain lines,” he said.

He recommends setting aside an additional 5 percent of the total budget to allow for unforeseen conditions.

Mr. Hickey said this is particularly true of older homes.

“You don’t know what is behind the walls,” he said. “Open it and find a problem that wasn’t in the budget.”

John Mentis, a real estate agent with Long & Foster in Arlington, agreed that new construction often is less complicated.

“You’re starting from scratch with a blank slate — put the wires and pipes where they need to be rather than try to work around what’s already there,” he said, adding that he is not surprised by the number of people who massively remodel their existing homes or even tear down and rebuild on the same lot.

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