Originally Posted March 6, 2016 By John Dessauer
One way of increasing investment profits is to purchase a property and have it rezoned in order to increase the real estate value. After this, the property investor can resell or rent the rezoned property for a significantly higher price. Rezoning can be a very profitable endeavor, and can be an inexpensive way to create valuable retail space for the investor’s portfolio.
Zoning determines what is legally possible to do with a property, such as developing it into a commercial site. For example, if there is a residential house on a piece of property with valuable road frontage, it can be very profitable to have the zoning changed to allow commercial activity on the property. The existing house can either be torn down and a suitable building can be built, or the house can be converted into a retail space. Either strategy will convert the investment property into a much more valuable piece of property for the investor.
Another good example of this principle would be the rezoning of investment property to allow mobile homes to be placed on the land. Buying property and converting it into a mobile home park can be a very good investment, especially if there is a strong need for inexpensive housing in the area. The same strategy can be used for duplexes or multi-family housing.
One of my best deals I have done in my career was when I took an old industrial garage and turned it into a beautiful office building. Changing zoning and use is a quick way to drive value significantly. Make sure though that there is a need for what zone or use you are changing to.
When considering the purchase of real estate for potential and profitable rezoning, check the outer fringe of areas where the business district meets the residential section. With the careful investigation of your chosen location, it is possible to locate a residential property that is actually located in a business district and has been overlooked by the rezoning professionals. This type of property would be very easy to get rezoned into commercial real estate and transformed into valuable real estate.
Rezoning a property can be quite time consuming and doesn’t happen quickly. This legal process requires the approval of local officials and must go through a long review process before the rezoning permission is granted. Your application will need to be reviewed by a zoning agency as well as presented to a committee and a zoning hearing master. This process alone could take several months. After a public hearing, a vote will be cast to determine whether the new zoning for the property will be approved. This whole process can take up to 6 months.
Before making inquiries about purchasing a residential property for rezoning first do some extensive research on the property to see if it is possible to rezone the real estate for commercial use. You can do this by contacting local zoning agencies in the area and discuss your plan with them. Speak with zoning counselors in the area to help you understand the process of rezoning and investigate whether the property in question can actually be rezoned.
It would be beneficial for the real estate investor to look for a rapidly growing area where the local officials have been consistently changing the property zoning from residential to commercial. This could be a good sign that a zoning change could be acquired in that location. However, always carefully research and investigate all possibilities before making a such a purchase.