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What is grandfathering? For our purposes it pertains to how a piece of land is used. The technical term is legal nonconforming and it applies to land uses that were legally established at the time the use began but since that time a regulation, typically zoning, has changed to no longer allow for that use. So the first part of the term, “legal” refers to the fact that the use was legally established while the second part of the term “non-conforming” refers to the fact that the use does not comply with current zoning standards. Once you remove the legal non-confirming use, you typically cannot reestablish that use and you then must bring the property up to the current standards. For example, if you have a house in a commercial zone that no longer allows for a residential use and you demolish it, you may be stuck having to build a commercial project. That may be great when the market supports it, but if it doesn’t you may be left with a property that can’t be developed or sold to someone that wants to. Lastly, be aware that some regulations make it so that if you demolish only 50% of the legal non-conforming use you will then have to bring it up to current standards. So if you demolish 51% of a house you may get stuck. Something to look out for on your next land purchase. Be informed, don’t get left holding the bag! 
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LOT TYPOLOGY There are different types of lots in the land development game giving you a variety of ways to profit. The value of the land typically increases at each stage. Here they are…
I’ll have more on this in an upcoming course on entitlements. Stay tuned!  Which property is worth more in its as-is condition?
1. A 20-acre vacant parcel zoned as open space. 2. A 1-acre vacant parcel zoned for a single family house with a water way traversing it and a protected tree in the middle. 3. A 5,000 sf lot in an urbanized residential subdivision with an expired entitlement that was left over from a home builder that went bankrupt. FEMA flood zones don’t matter? They do to someone that wants to build. Generally, you cannot build anything in the floodway but you can in the flood fringe. To do so, the finished floor of the building must be higher than the base flood elevation. If it costs too much to do that your buyer will move on. Remember…property that can be built on is often worth more.  Most investors stay away from entitlements either out of fear or out of a lack of knowledge. But did you know that there are “BIG” entitlements and then there are “little” entitlements? The big ones require public hearings, the Planning Commission or City Council. The little ones let you add value while flying under the radar by avoiding these headaches. But you need to know which are which….and they’re different in each jurisdiction. But once you have that combination dialed in, you’re set for future deals. Why only buy low when you can add value too?  If you have land suitable for development and are using comps to value it, you may be leaving money on the table or even worse, paying too much. There are too many variables to assume that two seemingly similar lots are in fact the same. If you’re going to take your land investing to the next level, your valuation methodology needs to change as well. We are in the process of developing content to address this issue and many others to help you make the most of your land investments.  A bit of Friday inspiration….before and after. Single family home in a multifamily zone redeveloped into 8 units. This property is located directly adjacent to a commercial corridor meaning there could even be a zone change play into the future.   Here is a screenshot of our Subdivide and Conquer course where I describe the three criteria that must be met in the initial due diligence process for any subdivision project. Hope this helps as you look at your next potential subdivision.  Is there really such a thing as unrestricted land? There are many types of restrictions...zoning restrictions, general plan restrictions, deed restrictions, subdivision map restrictions, and on and on. Many people are looking to unload their problem onto someone else. Do you due diligence, or that someone could be you. And get help if you need it.  |
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