Make Money with Real Estate Zoning

An Alternative Real Estate Investment Strategy

When it comes to real estate investing, you may think of real estate rentals or flipping homes. Those are all tried and true methods to achieve relatively high return on your investment, as long as you don’t over pay for the property. There are other ways to make money as a real estate investor, one of the ways involves real estate zonings. This may not be the easiest way nor a low-risk method but think of it as another tool in your arsenal.

What is property zoning? Zoning refers to municipal or local laws that dictate how a property can and cannot be used in certain geographic areas.

Zoning refers to municipal or local laws that dictate how a property can and cannot be used in certain geographic areas.

There are zoning codes on each plot of land, that the local community planned for a specific use. The idea behind zoning is to promote health and wellness of a community and maximize property value. That is why you don’t typically see hospitals in the middle of an industrial zone, or residential properties mixed in amongst warehouses. There are 8 main categories of land use: residential, commercial, multifamily, public, industrial, open space, agriculture and right-of-way zonings.

The idea behind zoning is to promote health and wellness of a community and maximize property value.

Now that you understand what zoning is, let’s talk about how you can use zoning to your advantage to make money.

The first way is to look for misplaced zoning opportunities. The idea behind this is to look for properties that have a zoning that allows for it to have a higher value than its current use. For example: you may sometimes come across properties for sale that are zoned for multifamily, but only have a single-family home on it. Now you can take advantage of that misplaced opportunity, either by reconfiguring the existing structure into a multifamily building or build more units on the property. You can find the property zoning by looking up the property tax record, or by going down to the local planning department.

The second way may be the easiest, take advantage of municipal annexation and its master plan. Municipal annexation is when a city acquires land, expands its boundaries into adjacent areas not already incorporated as its jurisdictional territory. The master plan is a long-term planning document that provides a conceptual layout to guide the city’s future growth and development. An investor can look at a plot of land, go check out the city’s master plan and realize that plot of land will be annexed into a shopping center in the future, and take advantage of the situation by buying the land at its current market value.

One of the most difficult ways to profit from zoning, is rezoning a property. Rezoning a property means to change the property’s current usage and repurpose it. For example, you can repurpose a residential property into commercial space. If it is a residential rental, it can fetch $1,500/month; but if you are able to rezone it into an office space and maximize the property’s potential, now you are collecting $3,000/month, thus increasing the property value. The reason why rezoning is a difficult process is because your attempt does not guarantee results. The reason is that you don’t get to decide if you can rezone the property, you have to apply, so that the planning commission of your local community will decide. Nevertheless, the process will be time consuming, and may even get political.

The reason why rezoning is a difficult process is because your attempt does not guarantee results.

Utilizing zoning strategy for real estate investing is not for everyone, and I don’t necessarily advice it as a primary strategy. But it can be a complimentary method when you are out scouting for your next investment.

About the Author

Danny Lau has set up several successful small businesses, he is a top real estate sales professional, and he shares real estate investment advice through his YouTube Channel.

Disclaimer

This article is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.