For fix and flip investors, renovations are a part of the home flipping process. Luckily, most problems can be fixed by renovating a particular room or area of a property. However, there are situations where isolated renovations aren’t enough to satisfy your project goals. In those cases, investors must weigh the pros and cons of reconstruction vs. renovation.
The decision to tear down or remodel ultimately comes down to four factors:
- Does the home have structural issues?
- How much do you want to change?
- Does the home have historical value?
- How much do you want to spend?
Let’s take a closer look at each factor and how they can help you decide whether to renovate or demolish and rebuild a house.
Does the Home Have Structural Issues?
For homes with poor structural integrity, the decision to tear down vs. remodel is simple. Things like intense water damage, rotting, or cracking in the walls and foundation that compromise a property’s structural integrity force investors to demolish and rebuild the home.
When weighing the pros and cons of renovations vs. new construction, costs play a major role in deciding which route to take. With the costs to rebuild a house from scratch significantly higher, uncovering red flags and knowing what to look for when flipping a house is essential to avoid purchasing a property with hidden structural damage.
When weighing the pros and cons of renovations vs. new construction, costs play a major role in deciding which route to take. With the costs to rebuild a house from scratch significantly higher, uncovering red flags and knowing what to look for when flipping a house is essential to avoid purchasing a property with hidden structural damage.
How Much Do You Want To Change?
Identifying how much you want to fix can also help determine whether to tear down or remodel an investment property. If most of your changes revolve around new appliances, fresh coats of paint, and updating flooring or energy efficiency, renovating is probably the best route.
However, if the scope of your work requires substantial structural changes, the answer isn’t so clear. Older homes with outdated layouts, condensed rooms, or floor and stair designs that don’t meet today’s housing codes could make a complete teardown the appropriate option.
Of course, many of these problems can be fixed through remodeling. The decision comes down to your unique situation and overall goals. If the property is in an expensive and quickly expanding location and you have the time and resources, demolishing and rebuilding a modern, affluent home may be the financially smarter choice.
If you’re more budget-conscious and looking to move on from the property quickly, renovating is the choice for you. In such scenarios, identify and prioritize the renovation musts. Be honest about what you’d like to change and what needs to change to make the home safe, comfortable, and up to code.
However, if the scope of your work requires substantial structural changes, the answer isn’t so clear. Older homes with outdated layouts, condensed rooms, or floor and stair designs that don’t meet today’s housing codes could make a complete teardown the appropriate option.
Of course, many of these problems can be fixed through remodeling. The decision comes down to your unique situation and overall goals. If the property is in an expensive and quickly expanding location and you have the time and resources, demolishing and rebuilding a modern, affluent home may be the financially smarter choice.
If you’re more budget-conscious and looking to move on from the property quickly, renovating is the choice for you. In such scenarios, identify and prioritize the renovation musts. Be honest about what you’d like to change and what needs to change to make the home safe, comfortable, and up to code.
Does the Home Have Historical or Sentimental Value?
A home is considered historic if it is:
- Connected to a significant historical event
- Connected to the lives of significant individuals
- Considered an embodiment of a particular architect, builder, or historic style
- Provides or will likely provide important historical information
- Aside from historical value, there is also sentimental value. Believe it or not, houses believed to be “haunted” are not always classified as historic, but can hold substantial sentimental value among a community or niche homebuying audience. If your investment has historical or unique sentimental value, your priorities should shift to preserving the original details of the property as much as possible. This means renovating the property and making conservative changes and updates that maintain the original features of the house.
How Much Do You Want To Spend?
Is it cheaper to renovate or build a new house? In general, the costs to rebuild a home are greater than remodeling. While there’s no precise formula you can type in to find the cost to rebuild a house on a calculator, the average rebuild costs between $500,000 to $800,000–significantly more than fix and flip renovation cost average, between $150,000 to $250,000.
If your budget is below $750,000, you have two options:
If your budget is below $750,000, you have two options:
- Avoid rebuild and fix and flip projects.
- Find a reliable and flexible short-term private lender to bridge your financial gap.
How to Finance Your Teardown and Rebuild or Renovation Project
For property investors looking to tear down or remodel a home, conventional financing options are often a less-than-favorable choice. Traditional lenders, like banks and credit unions, have significant governmental oversight. Countless checks and balances and difficult requirements make for slow application processes. It also makes for low approval ratings, especially for investors seeking business loans.
Private lenders, on the other hand, have fewer regulations, fewer requirements, and the freedom to customize loan options to investors’ specific needs. This combination makes business purpose loans, like fix and flip financing and ground-up construction financing, through private lenders the best options for real estate investors looking to tear down or remodel a property.
Business purpose loan options through private lenders provide:
Private lenders, on the other hand, have fewer regulations, fewer requirements, and the freedom to customize loan options to investors’ specific needs. This combination makes business purpose loans, like fix and flip financing and ground-up construction financing, through private lenders the best options for real estate investors looking to tear down or remodel a property.
Business purpose loan options through private lenders provide:
Flexible Terms
Unlike strict and heavily scrutinized consumer mortgages, private lenders offer business loans with the capital necessary to purchase, rehab, demolish, build, and sell a property.Fast Approval
Speedy loan approvals allow investors to secure funding faster than the competition.Competitive Rates
A business line of credit can finance the construction, repair, and purchase of a property at lower competitive rates, allowing you to cut costs and increase profits.Eligible for Low Credit Borrowers
Private brokers can provide loan options for borrowers with lower credit or little money down.ClVIC: Providing Fast, Reliable Funding for Over 10 Years
CIVIC offers the most reliable and flexible short-term business financing options on the market. Whether you’re looking to tear down or remodel a home, our flexible loan options, competitive rates, and fast approval process make us the preferred choice among fix and flip investors.
Whether you’re looking to tear down or remodel your home, we have the knowledge, capital, and resources you need to make your investments profitable. CLICK HERE to schedule a FREE consultation with a CIVIC expert today!
Whether you’re looking to tear down or remodel your home, we have the knowledge, capital, and resources you need to make your investments profitable. CLICK HERE to schedule a FREE consultation with a CIVIC expert today!
