Real Estate Investing Change Of
Use
By Matt Gerchow
The author has permitted the reprinting and redistribution of this
article.
Change of Use
Change-of-use is a term that is referred to in a sense of zoning as
well as a term used in construction plan review by code enforcement.
A change-of-use in terms of zoning does not automatically mean that
there has been a physical change to the structure, such as a church
being able to house a daycare facility. A little creativity and
knowledge of existing codes can increase the value of a property that
will attract tenants and prospective purchasers to your project.
A great example of change-of-use in recent years is the wave of
construction and condo-conversions that has swept across our country
and is now beginning in other countries as well. Where a piece of land
was once three retail stores, with use change it might grow to a
thirty-story building, housing several hundred units.
My first deal was two houses in one of the worst areas of Miami,
Liberty City. During the great real estate run up of 2000-2005 it
improved slightly, but I am sure it has probably slid backwards now.
The houses sat on one lot and the zoning was duplex. There was ample
room between the houses and it appeared from initial research that we
could split the properties. We closed on the houses due to some
unnecessary pressure from the seller who claimed he had another buyer
at full price and did not have time for us to get a definitive answer
from the city. Basically he lied and said it would be no problem to get
the properties split probably knowing full well that they could not be.
It turns out the houses could not be split and it would have to be sold
as a duplex. Not only that, we were nailed for not pulling permits then
robbed by another individual that forged the approval of the permit
documents. It really sucks being the new kid on the playground
sometimes. End of day it was a $38k loss but hey, that’s the
cost of a college education.
Change-of-use issues are not always a clear-cut issue and should be
treated with care. Make sure to check the probability of use-change
with your local planning and zoning office before making your purchase.
Do not let anyone pressure you into a closing. They will not be there
for you after the closing.
In another article I mentioned Paul Regan, who has sat in the
driver’s seat on over 600 transactions including his latest
condo conversion project of 130 units in Tallahassee, the Mystic Woods
Condos.
I know, I know, condo conversions are dead. Don’t stop
reading because you think condo conversions are a huge mistake in this
market. Is it possible that low-income conversions might still work,
even in this market
Retail Value (ea) 90k
Less Purchase 29k
Less Rehab 15k
Less Sales Cost 5k
Total profitunit 41k
Multiply that $41k by 130 units and you have a nice profit of
$5,330,000 for two years worth of work. I know that’s a whole
two years worth of work and we are here to learn about making money in
quick turn real estate.
This is an example of change of use at its best. Turning a run down
apartment building into huge profit center.
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
http://www.biggerpockets.com/articles/