To Tear Down vs. Not to Tear Down

When you do a house from the ground up, the costs start to add up.

Demolition: $8,000
Foundation: $10,000
Heating & Cooling: $13,000
Plumbing: $8,000
Windows: $15,000 - $50,000 (no, we're not spending $50K on windows!)

Ten thousand here, ten thousand there -- pretty soon you're talking real money. It's natural, in the midst of this all-cash blood letting, to begin to wonder if you've done the right thing. (That is normal, isn't it?)

A few months ago I went to the bridal shower of my good friend and colleague, Rochelle. The shower was held at a brand new house in Brentwood. It was your typical dream house. Massive amounts of space, gorgeous floors, gorgeous fixtures, gorgeous everything. I talked to the owner a bit and he told me his original plan had been to take the house that had been on the property and just re-do it. "But then I realized," he told me, "that for just $100,000 more, I could tear the place down and just start over."

This conversation haunts me. Sometimes I wonder if we should have just torn the Jewel of Hollywood down and built a McMansion. The current house, an original craftsman so bastardized in the fifties as to be made a true architectural hybrid, might not be worth saving.

Of course, we don't have that extra $100K (if that's all it would cost) to rebuild it. We barely have the money to do what we're doing.

That brings me to another economics equation hanging over the Jewel. The property that the house is on is zoned RD 1.5. What that means is that the land is zoned for four units.

Four condos, multiplied by $800K per condo comes out to $3.2M. The land (with the current house) cost us $750K. Assuming we put $150K into it, we're talking 3.2 minus $900K. That leaves $2.3M. Minus a million for construction. That leaves $1.3M. After all the fees and realtor commissions, let's call it an even $1M. Is it worth $1M to tear down the jewel and build condos?

You tell me.