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LOT VOCAB LESSON
To find out what uses are allowed within a certain zone, you need to study the permitted use chart within the zoning code. Once you get there, you need to know the difference between uses that are permitted by right versus those that may be conditionally permitted versus those that are prohibited. Permitted by right means that the use is permitted in that zone without any other formal review or permit. The opposite side of the spectrum are those that are prohibited, meaning they’re not allowed. And then there are the conditionally permitted uses that lie in the middle. These uses may be approved subject to specific conditions of approval. Or….they could be denied. This is the starting point of determining development potential for an end buyer. What zone is it in, and what are the allowable land uses.
What if you could profit by adding value to an existing commercial property by using entitlements to change the allowable use and not touch the property at all?
Examples include the conversion or apartment rentals to for-sale homes or the modification of old warehouses to residential lofts or the change of use from a old retail building to a use that requires some kind of entitlement to be approved. Each jurisdiction is different. THE DREAM IS REAL!!! IS YOUR PROPERTY IN AN OVERLAY ZONE?
You're likely familiar with what is called base zoning. But do you know what an overlay zone is? An overlay zone is a separate zone that is placed on top of, or "over" an existing base zone. The overlay zone identifies special provisions in addition to (or instead of) those in the underlying base zone. For example, you can have a commercial base zone that doesn't allow for residential uses and then an overlay zone that sits on top of a portion of the base zone that does allow for residential uses. Other examples of overlay zones include mobile home overlays, job creation overlays, movie studio overlays, auto services overlays. Jurisdictions can create overlays for many types of uses. So the next time you ask the planning office what the zoning of a property is, make sure you ask if it's in any kind of zoning overlay. If you don't you may be missing out on opportunity to broaden your buyer pool. 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! 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! 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. 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.
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