Buying teardowns is trending in Florida. Here’s what you need to know before buying yours.
Teardown properties are growing in popularity. They come in all shapes, sizes, and neighborhoods. In some cases, these are simply older properties which need to be rebuilt. In other scenarios these are distressed and abandoned homes becoming available to buy.
Finally, these may be perfectly functional homes, but on lots which can host greatly improved properties such as expansive luxury waterfront estates, higher-end townhomes, or even condominium projects.
Teardown Trends
More buyers are looking at teardowns for several reasons:
- Limited housing inventory
- Substantial rise in Florida property values
- Demand for newer-style housing
- Eagerness to acquire prime lots
- Cost to build versus buying existing properties
It can be incredibly attractive to buy, teardown, and rebuild in South Florida right now. How well that process goes, and how profitable it is will depend a lot on your diligence and preparation. Here are some of the most critical yet often overlooked factors:
True Values
Success in acquiring and repositioning teardowns is all about knowing your values and making appropriate offers. Buyers need to know the value of the property in the as-is condition, the subject-to value based on planned improvements, and what they can expect the value to be in the future.
Teardown Costs
Demolishing a building isn’t free. Before you can rebuild, you’ll need to clear the lot. Make sure you have several quotes on how much that will cost before you commit.
Eco-conscious Florida home buyers and investors may also want to investigate how they can recycle as much of the old structure as possible, instead of just adding it to a landfill.
Taxes
Know what you can expect regarding tax bills and breaks. There may be an opportunity to reduce property taxes during the teardown and construction phase significantly. Make sure you have a good estimate of what the new annual property taxes will be once the project is complete and you’ve received your CO (Certificate of Occupancy).
In some cases, the county or city may be willing to offer tax incentives and breaks for revitalizing property in certain neighborhoods. It’s always worth asking.
Permits & Permissions
Know what you will need permission and permits for. Understand how much they will cost you, and what you will need to obtain them (i.e. plans, surveys, environmental reports), and how long they may take to get. When the industry is busy, it could take several months to get new building permits approved.
Limitations
There can be community, city, county, and federal building codes to keep in mind when launching a new construction project. Find out if there are minimum square foot requirements. Know your setbacks, zoning for number and types of units, high limitations, and any impact fees that may be levied.
Plans
What firm will you use for your design plans? How much will a plan cost? How long will it take to get them?
Exit Strategies
Demolition and construction time may vary depending on the complexity of your plans and how busy contractors and building departments are. Consult with local experts so that you have the best possible projections of what the property may be worth as a rental or as a quickly resold vacant lot. It’s good to have options.
Financing
Even if you will be making an all cash purchase offer, it is wise to know what financing options may be available. There may be a need for extra funds for construction if you run over budget. Don’t make assumptions about financing availability and terms. Make an application and get pre-approved in advance.
Who the Top Agents are
At some point in this process, you will find great value in consulting the area’s top real estate agents. Know who they are. Who can you call for help with value estimates, timeline estimates, choosing the optimal features and finishes for your property, resale assistance, and help for acquiring additional land or adjoining rights?
Summary
Teardowns can be very attractive and profitable in South Florida. Getting a better handle on the above items will make a big difference in how well the opportunities play out. Print or save this page as your checklist and ensure a smooth and successful process.
