I challenge you to take a ride around Anna Maria Island and find a street where there are no properties either being currently or recently renovated or torn down. I can’t guarantee you won’t find any and I won’t take that bet, but all of us who either live on the Island or visit it often know what I’m talking about.
Finding the right home in the right location is everyone’s dream. Unfortunately, in spite of increased interest rates and a slight downtick in demand, the housing market is still a three-alarm fire. So, what do buyers with cash in their pockets do when what they’re looking for just isn’t available? They buy location and plan a major renovation or a complete teardown.
However, if you’re planning on taking on this kind of project, you need not only professional help but also the ability to stay focused. It’s important not to overbuild even on an island where properties are selling at what seems to be extraordinary prices. There is a broad calculation when remodeling a home or deciding on a complete teardown. The finished home should be worth no more than three to five times whatever you paid to acquire the original property per Ken H. Johnson, Ph.D., a real estate economist at Florida Atlantic University in Boca Raton. To quote him, “…otherwise you might develop way too much home for the neighborhood.”
Of course, building on waterfront property in the state of Florida opens up a Pandora’s box of regulations and requirements. First of all, in most of Florida and certainly here, if the cost of the improvements you’re making exceeds 50% of the market value of the existing structure preconstruction, you will be required to bring everything up to code.
Therefore, if you purchase a cottage on the beach on Anna Maria Island for $2 million and you plan on renovating it at a cost of $1.5 million, you will be required to bring it up to current codes. That means current hurricane codes for doors, windows and height as well as building materials and techniques for the roof structure like roof tie downs. All of this could make the cost of the renovation prohibitive and result in a complete teardown being more cost-effective. In addition, properties in a flood zone – all of Anna Maria Island – will need to meet FEMA’s requirements requiring that elevations have pilings of a certain depth, concrete walls and more.
Another factor supporting teardown as opposed to renovations are the hazardous materials you’re likely to find in older homes. Asbestos and lead paint were used with abandon in construction for many years and were great products until they were found to be lethal, especially to children. Getting rid of hazardous materials can be an expensive proposition since they need to be disposed of in a very specific way. I’ve been in a lot of older homes where all of the plumbing and heating systems were wrapped in asbestos; it was a nightmare to remediate and not unusual for the homeowners not to have any idea there was a problem.
Clever real estate agents are marketing properties not just in coastal areas but around the country as ripe for teardown in view of the shortage of available inventory. As in any real estate transaction, if you’re thinking of this type of purchase, doing your research and getting the correct advice is paramount.
Just for fun, pick a non-beach day and take a ride around the Island and count the number of renovations and teardowns you encounter; I doubt you’ll be surprised.
