Zoning Can Add Value to Real Estate Investment Property

by The Real Estate Buyers

Can Zoning Add Value to your Real Estate Investment

Real Estate Investors & Developers often ask the question will re zoning my real estate investment add value. This question has been asked since the enabling statutes were first passed in the State. The answer to the real estate investors  question is not straightforward and is dependent upon a number of variables such as (a) the timing of the real estate market, (b) the true value of the land, (c) the population demographics in the immediate and surrounding areas, and (d) the job market.

 Other important considerations include what is represented in the City or County’s General Plan, the housing market and what is the citizen’s climate for change in the area to be rezoned.

 Consider this hypothetical situation:

 Developer A has bought a piece of property at an auction. The property is located in an area with existing housing surrounding it. In his due diligence he found that the General Plan had designated the property for Heavy Industrial uses. It was an older designation developed in the 1980’s. Due to various factors the property had never been developed. What should he do? He knows that others surrounding him have had successful zoning changes to residential uses, but in this economic climate he doesn’t think the City would support a residential zoning change. The questions that he needs to answer are as follows:

  “If I do nothing and wait for the residential market to improve, will the City support my General Plan and Zoning amendment? If I push forward and reduce the intensity of the Industrial uses will the City support my application as I may be bringing jobs to the City?” How long will the City keep my entitlements in place and is it worth the hundreds and thousands of dollars in entitlement investment if there is no market at the end of the approval process?”

 Obviously these issues are all very important and relevant questions. The key lies in the attitude of the City, a good option would be to hire an entitlement professional that has good relationships with the decision makers in the City. Before Developer A submits his actual application he may want to submit the project as an item for a Council worksession. He will then get some idea of how the Council and surrounding neighbors will react to the above proposal. If the Developer gets positive feedback then he might be encouraged to move forward and spend the money, if not, he hasn’t wasted too much money and should probably wait until the political and economic climate has changed.