Property: tear it down and rebuild Before: A run-down bungalow that looked sadly like an outhouse, albeit one with a glorious south-facing aspect and grounds with plenty of potential, in Sturminster Newton, Dorset. After: An elegant, Lutyens-inspired, seven-bedroom family home, complete with stables, tennis court and swimming pool as well as a one-bedroom annexe. Guide price £3.25m (01202 856872; Savills) Tear-downs - shorthand for a house that is beyond refurbishment and extension - suit individual buyers for whom the priority is a tailor-made home, rather than fat profits. John Collard, a director at Robert Holmes, says tear-downs in sought-after Wimbledon Village and surrounds attract private purchasers "who are in a position to pay slightly more than a developer because they are not looking for a profit margin." In one such instance last year an individual living locally found a Thirties monstrosity on a tasty quarter-acre plot in Wimbledon Village, in south-west London, for which demolition consent and planning permission were all but guaranteed. Had planning permission not been a possibility, the 2,000sq ft house would have sold for about £2 million, says Collard. The buyer secured the planning permission and paid in excess of £3 million. He then built a house worth more than £6 million. A developer would have paid less than £3 million. The financial benefits of tearing down a property built between the Thirties and the Seventies are catching on among their owners, says Collard. People are waking up to the fact that they can unlock some value in their property by capitalising on the value of the plot and renting elsewhere in order to demolish and rebuild. They end up with a house worth much more per square foot than they would if they had merely extended and refurbished. Currently: A less-than-gorgeous 2,000sq ft monolith with vast roof terrace on Rutland Drive, Richmond. Replace it with A 4,000sq ft dream home (pictured). Architect's drawings available; planning permission secured. Guide price £1.6m (020 8940 2772; Hamptons) Kevin O'Connor of Cranbrook Basements, a specialist design and build contractor, agrees. O'Connor recently knocked down a five-bedroom, 3,800sq ft house sitting in half an acre in Buckhurst Hill, Essex, for which he paid somewhere between £1.5 million and £2 million. He is just finishing two new houses in its place, each at 6,000sq ft, complete with basements and loft-level living. They are the only tear-down-and-replace new-builds in Essex, and the benefits are self-evident, says O'Connor. You're getting rid of an old, windy house and replacing it with, in this instance, two cutting-edge homes. Through the efficiency of a new design, you can maximise use of the entire footprint, creating subterranean and loft space that didn't exist before. The shock of the new does not suit every house-hunter, of course, with period properties and old money continuing to laud it over upstart builds for many. If you live in Esher, Surrey, however, where Thirties houses are commonplace, tearing down and rebuilding makes financial sense. "When buyers look at a typical house in Esher," says a local agent, Trevor Rawlings of Savills, "they want to renovate to modern-day standards. Then they do their shopping list for a substantial scheme of works to be done all in one go and the bill comes to hundreds of thousands of pounds. Even then, the refurbished property will still have disadvantages, including low ceilings and expensive heating costs. Then they look at how much it costs to demolish the thing and build something new and the difference is only a few hundred thousand. The difference in the end value of the property, however, is much greater. That does not mean, however, that you should make the new-build as large as you possibly can, warns the property developer Steve Britnell of Manor Grove Homes, which has worked on high-end tear-down projects in Berkshire, Middlesex and Surrey. Bigger does not necessarily mean more value, whether you are in Chelsea or Gerards Cross. Every area has a maximum value. What's more, if the new, much bigger build is badly designed you won't increase your return. In effect, then, you are reducing the value of the piece of land rather than maximising its value. Britnell's latest tear-down was a Fifties, 2,500sq ft family home sitting in a comparatively large plot on the private Crown Estate in Oxshott. Britnell has created a mansion in its place. High ceilings aren't the half of it. A paean to technology and easy, remote-control living, the house has sweeping staircases and more leisure facilities than some sports centres. Not every house-hunter in search of a tear-down project is hankering after show homes that steal the technology spotlight. When Gerd and Vera Reimann-Dubbers replaced a shed-like bungalow with a Lutyens-inspired country house and the cowshed with a pool room in Sturminster Newton in Dorset, three factors governed the couple's designs. "I was laying the foundations for the happiness of my children," says Gerd, who moved to Britain from Germany 11 years ago. Hence the swimming pool, stables, equestrian arena, tennis court and expansive entertaining space. I also wanted to harness the latest technology to create an energy-efficient, solar-powered property. Materials were also very important. I wanted to give the sense of a house that had been there for some time. The bungalow had already been demolished when they acquired the plot and planning permission was in place, though they did have to reapply to construct the house to their own designs. With three out of four of their children now in further education, the house is now on the market. "It is time to downsize," says Gerd. Will he seek out another tear-down. Perhaps. But it takes energy. And what kind of house would we build this time? One senses he is already drawing up the plans. Once a demolition dreamer, always a demolition dreamer. Teardown tips It's all in the timing. The difficulty with tear-downs is sourcing the plot. You need to be in the right position at the right time. Get to understand your local market and the planning possibilities. Be realistic. Submit plans sympathetic to the environment and community to avoid disappointment. Remember, the plot is of no value if you cannot secure demolition consent and planning permission, so consider putting in an offer subject to planning permission. Do not be tempted to use up all your garden space for your new-build; you can build down as well as up to maximise your square footage instead. Choose an architect who shares your ideas and vision but, crucially, mixes those up with his or her own ideas and expertise. Consider your energy needs prior to construction and remember that energy-efficient solutions are more expensive in the short term, but cost-effective in the long term. Unless you are a developer, embark on a tear-down project with a view to living in your new home rather than to cashing in.I If you do want to make a profit, then bear in mind the rule of thirds: one third spent on the plot, one third on the construction and one third on the profit. Then reduce the projected profit, just to be on the safe side. Investigate the VAT benefits on materials for new builds.