1.
M I C H A E L Z A R A N S K Y
W H E N T O R E F U R B I S H ( O R D E M O L I S H )
A S T R U C T U R E

2.
O V E R V I E W
There are many factors to consider before you decide whether a property
should be renovated and refurbished, or demolish outright to make way for
another structure. A lot of these circumstances are local, and specific to the city
(or town) where your property is located. This includes zoning ordinances,
building costs, and barriers to entry, to name a few.

3.
F I N A N C I A L A N D
L E G A L C O N S T R A I N T S
As I’ve written previously, much
of the decision to refurbish or
rebuild will come down to costs.
Many of the biggest cities, such as
San Francisco, Washington DC, or
New York, will have extremely high
building costs. For instance, in
2015, the cost of building in New
York was twice the national
average, a result of a 5 percent
increase over three consecutive
years.

4.
Yet all too often, high costs and heavy regulation go hand-in-hand:
construction rates are expensive in large part because permits are pricey and
legal restrictions are significant. For example, New York City’s zoning code is
extremely convoluted, varying from one neighborhood to the next: experts
estimate that some 40 percent of existing, vintage buildings would not be able
to be constructed today. For these reasons, such real estate markets are
dominated by a handful of powerful real estate developers.
Given these sky-high costs, it makes much more sense in some areas in
renovate, rather than rebuild. Doing so will allow you to avoid the maze of
paperwork–and its attendant expenses.

5.
H I S T O R I C A L B U I L D I N G S
A N D S T R U C T U R E S
Yet another situation where it might
make more sense to renovate (rather
than rebuild) is when investors are
dealing with storied, vintage buildings.
I’ve had the pleasure of working on
several such projects in the past, and in
my experience, it’s a mistake to tear
down a grand old beauty and replace it
with yet another soulless, glass-and-steel
structure.

6.
True, exceptions might have to be made in some cases (perhaps if the
building is too old or dilapidated, worn beyond repair). But for the most
part, barring any massive structural issues, you’ll be doing the community
(and your wallet) a favor by restoring and rehabbing these beautiful,
classic apartments–especially if they sit in an area where property rates
(and thus, desirability) are rising.

7.
A U R O R A , I L
Take the case of Aurora, Illinois. Situated
west of Chicago, this city of nearly
200,000 is a rising star–home to a
flourishing economy as well as a rich
history, expressed through buildings
designed by architectural visionaries like
Frank Lloyd Wright and Bruce Goff. The
city now is the most affordable housing
market in the nation (as named by
Realtor.com), and one of the best run
cities in the country.

8.
H I S T O R I C A L B U I L D I N G S
A N D S T R U C T U R E S
Back in the early 2000s, I had the
opportunity to pick up a vintage, 34-unit
apartment building in an Aurora
neighborhood, one that largely consisted
of Victorian-style, single-family homes.
All of my initial misgivings evaporated
when I visited the property: located at the
center of Aurora’s historic district, the
building had seen better days–but
importantly, was a perfect candidate for a
renovation. The grounds were brown and
poorly maintained, the common area and
halls were chipped and faded, and the
apartments themselves were worn out
and crumbling.

9.
Our efforts were extensive, leaving nothing
untouched. We redid the grounds, hiring a
landscaping crew to plant flowerbeds,
grasses, and other plants; we hired crews to
redo the masonry, cleaning the brick,
repainting it white, and applying a clean,
chemical treatment; and we renovated the
interiors, dealing with everything from worn
carpeting to replacing water pipes. In the
end, we sold the historic property for a net
profit that exceeded half-a-million dollars,
and moreover, won the Vintage Property of
the Year Award from the Chicagoland
Apartment Association.

10.
G O V E R N M E N T
P R O G R A M S
Lastly, don’t forget government
programs and incentives. Often,
local governments will favor real
estate developers and investors
with significant benefits, which
often take the form of low (or no)
taxes. These programs generally
tend to be quite specific: some may
favor refurbishment, while others
may be aimed at rebuilding.

11.
L A N C A S T E R , P A
Take Lancaster, a small city in the rural
heart of Pennsylvania Dutch country.The
area has seen an uptick in economic
growth, but concerned about its various
boroughs, officials have offered generous
tax incentives for developers and investors,
centered around refurbishing
existing structures, rather than
building new ones. For instance,
property owners who add $100,000
in improvements would be exempt
from taxes for one year, with taxes on
property value being instated
gradually over a period of 10 years.

12.
Ultimately, refurbishing or
rebuilding is a heavy decision, and
not one to be taken lightly. Given
the patchwork of state, local, and
federal legislation, it’s important to
do your research. Two markets
within the same state can vary
widely–to say nothing of two
markets within the same nation.
Still, the right decision can pay off in
more ways than one.

13.
THANK YOU!
V i s i t M i c h a e l Z a r a n s k y . c o m
F o r M o r e !