What Should You Consider When You Knock Down and Rebuild your New Home?

The ever rising house prices have pushed house prices beyond where buyers can afford. Most buyers have no choice but to settle for lesser properties or move further away from where they wanted to live in.

But, did you know? Buying the worst property on the street might be a cheaper and smarter way to get into the suburb you've always wanted?

Increasingly property buyers are turning to Knock-Down-and-Rebuilds (or some agents might call this a "Restart" property) to buy into the suburb they wanted. About 1 in every 5 of our clients are looking at such properties, in the East and South Eastern Melbourne suburbs.

In this article, we will consider the pros and cons of a Knock Down and Rebuild.

What is a Knock Down and Rebuild property?

A knock down and rebuild is simply a property where you buy, demolish the old property and build a new one.

What are the pros of a Knock Down and Rebuild?

Obviously there must be some reasons why buyers are considering a knock down and rebuild. Here are some advantages:

1. If you are rebuilding your current home, you can stay in an area that you are already familiar with. You also save on real estate agent fees, stamp duties, and related legal expenses, as you are not buying or selling any properties.

2. If you are buying a property from the market, you can usually buy a property at a lower price. Obviously, this depends on the condition of the property. If it is a brand new property that you are going to rebuild, you probably would be paying a premium for that. Assuming, it is a run-down property, or a "restart" property or one needing some serious TLCs, you may or may not necessarily mean you can buy it at below market price. The price depends on demand and supply. But, generally, an old house meant for rebuilding will be cheaper than a typical new or liveable property in the area.

3. You can custom design your own floor plan. This is typically the reason why a rebuild appeals to buyers. They have the opportunity to restart and have their custom floor plan built. No need to accept compromises with an established property.

4. You can custom build the property with the quality you want. Yearning for that gold toilet, gold bath? You can now have them installed in the location you want in the house. You can have a bedroom in the bathroom. No more compromises.

5. You enjoy the latest and most modern features and energy savings from a modern home.

What are the cons of a Knock Down and Rebuild?

Some of these downsides might be obvious, but some are issues which buyers might not have considered.

1. Long timeline. Many buyers are not aware of the long time line required for a typical knock down and rebuild. On average, the whole process from getting the keys to moving in can take up to 2 years or more. Here is a breakdown of the timeframes:

   1. Selecting and engaging a builder/architect: 3 months

   2. Custom design the house: 3 to 6 months

   3. Council permits and approvals: 6 to 9 months

   4. Build: up to 12 or 15 months depending on size of the house, availability or materials and tradesmen.

2. If you are rebuilding your current home, you will need to consider temporary accommodations, while your home is being rebuilt. You might need to consider the process of moving out and moving in. As you will be doing that TWICE. Once to move out of your current home, and move into your temporary home. And a second time to move out from your temporary home and move in to your newly built home. You'll need to factor in moving costs, temporary accommodation rental costs, mortgage cost for the house you're rebuilding, and cost of servicing the loan for the build.

3. Unexpected cost blowouts. While domestic building contracts are fixed priced, cost blow outs aren't unheard of.

   1. You might have forgotten to include a feature you have always wanted.

   2. The council might need you to make some changes to your plans before they can approve it or grant you a occupancy permit and letter of compliance.

   3. A fixture that you've wanted isn't available and you have to consider other alternatives.

   4. Unexpected, significant increases in building material costs.

   5. Unexpected fluctuations in exchange rates, if the material or fixtures are coming from overseas.

4. Unexpected delays in the build. Delays can happen for all reasons.

   1. Builder might have another project which overran.

   2. Unexpected delays in shipment of materials, especially if they are coming from overseas.

   3. Changes in regulations. While it is unlikely, urgent/critical changes in building codes do happen, especially if they are Health and Safety related.

   4. Unexpected economic shut-downs. Shut-downs do happen due to strikes, weather events, pandemics, etc.

5. Build quality may not be up to expectations. It is always exciting to build your own home. But most buyers unfortunately make the worst mistake when they build... Builders are often selected based on price alone, and they went with the cheapest builder who can do the job. And to provide the lowest quote for the project, builders are known to cut corners use cheap materials and cheap labour or work with thin margins. This is risky as the build quality is not likely going to be durable and the builder do not have enough buffers to absorb price fluctuations or delays. Builders may end up going bankrupt.

Here at Concierge Buyers Advocates, our team of builders are carefully selected to ensure they meet our quality standards. Have a chat with us, if you are considering knock downs and rebuilding. Our director and principal Buyer Advocate Rayson is a trained builder and he will be able to give you an idea of what's involved.

How do you find a property to knock down and rebuild?

If you need help to find a property where you can knockdown and rebuild, have a chat with us. We've been helping clients outsmart the property market and find suitable properties to knock down and rebuild.

Get in touch.