Today I want to talk about how you can take advantage of the many zoning changes that are happening in areas all around the country. I know that some of you have already taken advantage of this very smart strategy, but for many, it will be a new arrow in your real estate investing quiver. When a zoning change occurs, it can mean a tremendous opportunity for both acquiring a property at a discount as well as for manufacturing growth and income.
Council zoning power
Typically, as markets and economies change and grow, local councils react in some fashion or another. But one of the main areas of control that they have is their power to determine how areas grow and the kinds of development they will or will not allow. Councils differ as to how they want their areas to develop, but generally, it is their job to guide growth and development to keep the area desirable and solvent. One way to increase tax revenues is to allow zoning changes to occur that stimulate development or redevelopment of areas. This enlarges the property tax base and takes in more money.
For example, as a mining town expands, the local council may decide to change the zoning in some areas to allow multi-family residences to be built to accommodate the growing population of workers moving there. Of course, this also provides more tax revenue for the council. Or, zoning changes might be in response to new businesses moving in or relocating to an area, bringing their workers with them. The point is that councils rezone areas quite often, and in doing so, provide quite a bit of moneymaking opportunities for smart real estate investors.
How and what to look for
Some of the easiest rezoning opportunities may well be in your own neighborhood or suburb. Fortunately, there are several ways to find out where they are. One easy way is to Google the local council name or the suburb that interests you. The first link that comes up will have the name of the local council and just go from there. You’ll be able to see all kinds of council activities, including recent zoning changes that have occurred or that are being considered or proposed.
Usually they will have a map of the area with different zonings identified in each.
You will see color-coded zones on the maps with identifications such as “Residential A” or “Residential B”, or “2A “or “2B” or whatever multi-residential zoning might be for your local area of the country. You will be able to read the code from the table that describes each. Codes may differ from one part of the country to the next, but they’re easy to read.
Just open your eyes!
But you know what else you can do in your own area? When you’re driving for work, for instance, or just out and about, take note of any changes that might be taking place in nearby suburban neighborhoods. Are duplexes or apartment blocks going up where there were none before? It may well mean that that area has been re-zoned.
So before you even look at council maps, see where a block of townhomes or villas or a block of units may have recently been constructed in a neighborhood of single homes. That will tell you right away that a change in zoning has occurred in that area. That means that there is opportunity to be had; it means you’re in the money zone!
Of course, I’m not saying to not use the internet to search for zoning changes. In fact, I actually prefer to do my searches in the comfort of my own home or office. But at the same time, getting yourself into the money zone frame of mind is important. You just need to start being aware of any changes that may be happening in your own area with regard to what kind of housing is being built.
Becoming aware of your area is a smart strategy but is also a necessary one. That’s because no council–or for that matter, no builder–is going to put up a sign celebrating the zoning changes in a given area. The builder, or whomever, has petitioned the council for a zoning change, jumped through whatever hoops the council wanted, paid filing fees, and then the zoning changes were approved. But it’s up to you to look for the changes that come about from that change in zoning. That’s where the opportunity is.
From low to high-density zoning
When you see townhomes being built in what used to be single residence neighborhood, you know that a higher-density zoning change has occurred. Higher-density zoning changes mean you can add onto an existing property or tear down what’s there and put up a multi-family structure to manufacture both equity and income. Chances are good that most property owners in the neighborhood are unaware of the zoning change or what it means. They aren’t aware of the value that they are sitting on! This is the opportunity you want to look for.
Another way to determine if zoning has changed, or if permitted expansions or additional residences have been approved before, is to look at the area in question through Google Earth. You will see the property lot lines as well as the properties themselves. If you see additional housing within the same lot that has been subdivided, then you know there is at least precedence for doing so.
Now, it’s important to know that precedence in no way obligates a council to approve your request to add a second residence on your own lot to be subdivided. But you can ask in such a way as to be treated as fairly as other neighbors have been when you ask for the council’s approval. There are no guarantees, of course, but it is a reasonable request. You won’t know until you ask.
Leverage your knowledge for profit!
What you do with this knowledge of re-zoning opportunity will determine how much money you end up making. Whether you door knock, send out letters or just Google the addresses to find out about potential deals, you need to find out who owns the property(ies). When you do, you can ask the owner is if he may be interested in doing a deal with you as a joint venture, where you split the profits. Or maybe the owner is interested in a straight sale of the property.
Of all the ways to contact the owner, knocking on doors is my preferred option just because it puts you in a face-to-face situation. This gives you the chance to get more information about the owner, his situation, and what he or she might be interested in. It also gives you the chance to build a relationship with the owner from the start.
And who knows? The owner may be very interested in selling or raising the value of his property. The owner may be ready to move closer to a relative or doesn’t have the knowledge or money to make the improvements on the property that will put an extra $20,000 or $30,000 in his pocket. But because you do, and you knocked on his door, you’re in a great position to make a deal without the costs and fees of purchasing the property.
Re-zoned areas are not hard to find, nor are they difficult to profit from. You just have to be aware and do the due diligence. The chances are good that you’ll find the right deal that will land you in the money zone!