Build a New Home or Renovate Vintage Homes – Luxury Home Land Values Houston

28Jun 2017
general contractor houston

Evaluating the decision to renovate vintage homes or to demo the property improvements and build a new luxury home is a very common buyer assessment challenge in Houston, Texas. A large number of affluent home buyers face this common dilemma when evaluating buying vintage homes in a high end neighborhood.

These challenges are commonly the result of land values rapidly increasing during a period of little available home building site inventory. With few home building sites available, home buyers and builders alike must compete for the same future home construction sites. The rising home demand, coupled with the shortage of building lot supply and new home market values, creates market pressure on older vintage homes land values. These higher value land prices cause new home prices to also continue to rise, which maintains upward pressure on building lot values in exclusive neighborhoods.

We will explore some of the relevant factors that have an important impact on the difficulty of making a conclusive decision.

home renovation

High Demand Neighborhoods

The genesis of the build new or renovate dilemma starts with high demand neighborhood properties. High demand neighborhoods are the ignition point for rising property prices. These neighborhoods commonly are centrally located in Houston’s metro areas. They have larger lots and unique neighborhood features such as beautiful older trees, high levels of area security and the best restaurants closely located.

Houston Texas is one of the few major cities that does not have zoning laws. Instead Houston allows the neighborhood’s to create architectural restrictions as part of the deed restrictions and allows smaller municipalities that have been incorporated into the City of Houston to hold jurisdiction over building permits and inspections. It is the deed restrictions that inherently develops governance over the neighborhood community’s ordinance enforcement.

Homes Structural Condition

Determining if the home has good bones can be not only a very relevant question, but can become the decisive factor. If the home’s foundation has been compromised or the structure is suffering from material fatigue, it is likely the home is not a good candidate for renovation. It would make financial sense to tear the structure down and build new. If the structure is sound, minor structural fatigue can be addressed when the home is taken back to the studs. The buyer should anticipate the need for replacement of the mechanical, electrical and some critical plumbing infrastructure.

Close consideration should be given to how the existing floor plan lends itself to modification our home additions to meet the buyers lifestyle needs. The roof line can be expected to be modified during the expansion of the homes envelope to accommodate room additions. If the homes total square footage is sufficient to meet the buyers needs. but the floor plan will not, the homes floor plan can be repurposed through design.

Financing Options

Financing considerations should be entertained early in the feasibility phase during the evaluation. Many lenders have different underwriting standards for home construction financing options. It is a short list of lenders that do construction financing on new homes and even a shorter list of lenders that will undertake a major renovation.

One of the common hurdles that buyers face with properties that have high land values and little to no improvement value are low 3rd party appraisal values. Lender appraisers have a tendency to error on the lower end of properties in less than optimum condition. This can lead to the buyer being required to come out of pocket for more cash than originally estimated.

Uncovered Conditions

One of the critical factors that buyers fear of engaging during a major renovation is the discovery of the unknown when the floors and walls are opened. Even in some cases where the home renovation plans include replacement of many of the high risk failure components like water supply lines and HVAC equipment. the risk of such things as mold, termite damage and dry rot can still exist despite proactive testing methods.

The need to conduct a complete renovation increases substantially when the home approaches age of 40 – 50 years. There are a number of reasons for substantially improving the homes infrastructure. Some are associated with avoidance of hidden destructive risk as previously mentioned. There is little sense in making a major investment to a home’s refinishes to have them damaged years later by failing plumbing or a electrical fire.

Stripping the homes walls back to the studs also allows the buyer to address any isolated structural deterioration ensuring the structures integrity for years. This also provides an opportunity to bring the structure and homes envelope up to current building and energy codes. By increasing the homes energy efficiency the buyer will not only reduce monthly energy cost, but will also reduce the risk of future damage caused through moisture or element infiltration.

New Home Construction Value

The remaining critical component of the build or renovate assessment is the gathering of new home construction prices. Buyers should be cautious when comparing prices per square foot without a close comparison of the associated materials and specifications of the homes finishes. Not all luxury homes are created equal. Without a detailed comparison, a buyer can easily make a huge price assumption mistake that leads to a gross miscalculation of an estimated new home construction price.

Build or Renovate Assessment Analysis

There are many advantages and disadvantages to either renovating vintage homes or building a new home on a premium lot. In summary they are-

Renovate Existing Home



Total Cost Less Then New Home

Likelihood of Budget Surprise Overruns

Greater Upside Capital Gains

Fewer Design Options

Shorter Project Time Duration

More Challenging Then New Construction

New Home Construction



More Design Options

Greater Construction Cost

Easier to Finance

Longer Project Time Duration

More Budget Control

Loss of Architectural Charm


One Comment

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