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How Zoning Can Affect Your Property Value

How Zoning Can Affect Your Property Value

When looking to purchase or hold onto a property for the short or long term, it’s important to understand what the zoning is for the property. Let’s say you want to hang onto a property, with some acreage, for the long term. It would be smart to get agricultural zoning, so your property taxes are minimal. You can simply do that by putting animals that don’t require a lot of care on the property. If you’re in an area like Florida, you could plant orange trees or grapefruit trees. If you’re in Georgia for example, you could put pecan, peach, or pear trees and now you have an income in addition to agricultural zoning. In a lot of states, you can get agricultural zoning by using pine trees for ground covering, because you’re raising trees to be turned into wood for a building. That can also be very profitable, especially with the prices of lumber on the rise.

As cities grow and expand, many properties in the county are annexed and the zoning can still be agricultural. Investors should go to the city or county and ask for a 10-year growth plan. Ask for the road expansion plan which will show you where roads are going to be widened and where new roads are going to be. It will also show you what the city or county wants the property to be zoned in the future.

As an example, if you have an agricultural property and the 10-year growth plan shows multifamily that would be suitable for townhomes, apartment complexes, or quadruplex, the value of your property can literally double, triple, or even quadruple by simply getting it rezoned. One investor bought a 17-unit mobile home park inside a city where the 10-year growth plan is for it to become townhomes. It was purchased for approximately $300,000 and by making a zoning change it would be worth a minimum of $1.5 million.

If you’re buying a property and you want it changed from agricultural to possibly C1 or C2, you could put in your contract, “I will close 90 days after getting suitable zoning.” Now the seller has a vetted interest in helping you get it rezoned from the city or county and may attend the zoning hearings to assist you. There is one property with a 70-year-old dilapidated house. It’s a single-family home and the property was zoned R3. In that area there are three residential family homes, so the lot is worth more than the house. That leaves the option to tear the house down and build a 3-bedroom 2 bath home, with the potential to make $1 million profit. If done in your self-directed Roth IRA, that could end up being tax free for your retirement.

Look at real estate and see what it can be, not just what it is. Look at what the zoning is and look at what the city or county would like it to be. By connecting the dots, you can become extremely wealthy. Just by knowing where they’re wanting to widen the road or build a road that changes everything for you as an investor. Knowledge is power, use it to your advantage.

Areas of Review

Takeaway

Big picture takeaway points

  1. There are several different types of zoning.
  2. Look at real estate for what it can be, not what it is.

Reflection

Self-reflection questions to think more about the content

  1. How can zoning affect my income and taxes on a property?
  2. Do I have a self-directed IRA, and if not do I know how to open one?
  3. What is my city’s 10-year growth plan?

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