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Commercial Property: The Zoning Gamble

Aug 17, 2007
Keeping this in mind, a savvy investor can use this to his advantage if he can formulate a real estate investing strategy that helps him find residential properties and then resell them as commercial properties. Imagine earning a 100% or greater return on your investment. It can be done, if you have the patience of Job and know where to find the right properties.

The first step in any real estate investing venture is to locate a property that has the potential to earn a great profit with little risk involved. While there is more risk associated with finding residential properties and them selling them as commercial properties, you can minimize this risk with a lot of research and pre-planning.

In order to find a property that is likely to be rezoned commercial in the near future, you need to study a community and become familiar with its zoning history. Many sprawling communities have annexed property faithfully as the business section of the community has grown. Spotting this trend and scooping up cheap rural properties that will soon be zoned as commercial properties is a great real estate investing strategy.

Look for properties located on the main drag of the community close to the commercial zone line. Avoid communities that have become stagnant. Instead look to communities that are experiencing phenomenal growth. This growth is bound to bring in new businesses and they will have to build somewhere. Hopefully they will build on your property.

In some communities, there are residential properties sandwiched in between commercial properties. When it comes to real estate investing, this deal is as sweet as it gets. The residential property will be zoned as a commercial property. The only questions are when this will happen and if you can talk the current homeowner into selling.

Once you have found the ideal property, you can go about marketing it in two different ways. You can first get the property rezoned and then market it to businesses or you can market to businesses and let them deal with the rezoning issues. Obviously rezoning the property yourself will result in a wider profit margin.

To rezone a property for real estate investing purposes you will need to approach the governing council of the community and receive a favorable vote on the issue. Be sure to have a solid business plan made up highlighting ways that the rezoning will enhance the community. The council will care little about how much money you will make from the deal, but will be greatly interested in what businesses have expressed an interest in moving into the community. Show them how rezoning the area will make them money, and they will likely approve the proposal.

As you can imagine, not all of these ventures go as planned. Be sure that you have an exit strategy such as reselling the house as a residential property if the zoning issue can't be resolved.
About the Author
James Klobasa, once broke with no job and $20,000 in debt made a choice that changed his life forever. That choice was investing in Real Estate. With the founder of, The Little Building Co. you too, can learn at Real-Real Estate Investing
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