When to demolish; when to keep.
How do you decide whether to add or demolish? The answer depends on a combination of factors unique to the specific property. Age, size and condition of the existing house, aesthetic preferences, the size of the lot, the desire to maximize the back yard (or not); all of these are important things to consider, and it suggests that a careful analysis and weighting of the different factors will be needed before a good answer is found.
Consider the amount of space available for new construction. If the lot is large enough to allow a new addition at the side or rear of an existing house, much of the older home can be maintained without major modifications. On the other hand, if a second story is added to an existing one-story structure, the older portions will have to undergo some surgery: new structural supports will be needed from the new foundations to the second floor, a new floor structure above will replace the existing roof, and room must be found for a new staircase. In short, significant (and often costly) alterations to the existing building.
In this second-story scenario, it is sometimes better (or less costly) to demolish the existing house and build a new one, even if this results in a smaller overall home than might be possible through an addition. A larger lot can easily accommodate a side or rear addition to an existing house. But a smaller lot may require adding a second story instead, or replacing the existing house altogether.