BiggerPockets

From a developer’s perspective, rezoning a property provides an opportunity to increase the value of the asset.

Through this process, developers can increase or alter the uses of the site to provide it greater versatility. The value of this process often outweighs the risk and uncertainty involved.

But the merits of undertaking a rezoning application need to be weighed carefully against the uncertainty of the process.

The rezoning process typically begins with a pre-application review that occurs up to six months prior to thesubmission. Municipalities often require that the applicant meet with planning division staff so that the applicant can get information regarding zoning bylaws and potential problems that may be encountered.

A pre-application meeting is usually necessary to allow the community time to review the proposed zoning changes. The meeting is typically announced by posting signs on the site and possibly a notice in a local newspaper. The meeting helps gauge the amount of community support and provides an opportunity for people to voice concerns.

Meetings usually take place in the weeks leading up to the official rezoning application submission.

The next step entails submitting an application form and applicable fees. The form and fee schedules are usually available at local municipal offices and should be obtained well in advance of starting the rezoning process. Applicants will also be required to provide a legal description of the property; proof of legal interest in the property, such as a deed to the property or paperwork showing intent to purchase the property; and a map showing the location and current zoning of the property. More complex applications may have additional requirements, and the local planning department should inform you of them during the pre-application review.

A municipal hearing is usually scheduled from three to four weeks after the application form is submitted. At the hearing, you or a representative may have to testify as to the merits of the rezoning application. As part of the preparation process for this hearing, several agencies will be notified of the hearing, and each will have an opportunity to provide written comments and recommendations during the review process. Agencies that will likely be contacted include the fire department, public works, parks department, local water utility provider and local school board. During this period, developers will be required to answer any questions posed by a planning analyst. A recommendation will be made on the merits of the application from this review.

Once the hearing is completed, a short waiting period begins while the municipality follows the political process through to completion. A city council hearing will be held to debate the application and present an ordinance drafted by the city attorney. The ordinance will usually be read three times prior to municipal approval. Once it is approved, a notice will be placed in the local newspaper, and the rezoning will come into effect.

To be approved by the municipality, the rezoning must usually benefit the public or the general welfare of the community.

Commercial Real Estate:

Investing in Commercial Real Estate has its pros and cons.  It is important to do your homework and best to use a trusted and reputable CRE professional to assist you.  Just like investing in Residential, Commercial can produce a steady flow of income.

Let's look at the advantages:

Assuming you own a professional office building you will notice that your tenants typically take extra care of the space they are leasing.  They are running their own reputable business where they desire an attractive place for their clients/customers.  This is the major difference in commercial real estate investing.   Your leases will typically be set up for a minimum of 3 years.  National tenants and government agencies often sign anywhere from 10 to 40 year leases.  Obtaining financing is not easy but it has a lot to do with the income production (or potential of income). Property value will primarily be based on the income your investment produces.  This is a big advantage compared to residential (single family) where values are based on comparable sales.

So what are the disadvantages?

Commercial properties will often be much more expensive.  Lending is not easy anymore and will most likely require 30% down or more with higher interest rates.  Tenant improvements can be costly!  Yes, you will typically recover these costs through the negotiated lease rate but they will need to be paid upfront.  Your tenant must comply with city/state/county/health/fire/police/environmental codes.  These codes can often be major hurdles to jump through depending on the business your client is running.  Start up businesses do fail - It happens, they can go bankrupt and you may lose out on rent and recovering any tenant improvement costs.

There will be pros and cons to any investment.  Take your time to do your due diligence and ask for advice from those who have walked the path before you.

Whether you are a novice to Real Estate investing or a seasoned pro, it is important to understand the differences between Commercial & Residential Investments.  Both of these have their pros and cons. Let's take a look at residential in this post and talk about commercial in the next.

Residential

Every tenant wishes to occupy your investment home for a minimum of 5 years, pay rent on time and treat the home as if they own it themselves - right?   Only in a perfect world.   Many investors get headaches over the constant battle to keep quality tenants in their investment houses.  This is where Property Management comes in - and saves you!  Or, do they?  If you have a reputable PM taking care of your investment they most likely do a good job with all the little things you don't have time or want to do yourself.

The problem becomes the costs associated with bringing in a new tenant.  Did the previous occupant trash the place?  Sure, you retained your deposit... but is it enough to cover the damages?

So you only purchase homes that are new and in desirable neighborhoods - that's not going to guarantee the tenants will keep up on landscaping, carpet stains, broken windows, clogged drains.  If you are fortunate enough to be in a market where your rents are higher than average and you are getting paid on time - congrats!

Otherwise - take a look at the option of investing in Commercial Real Estate.  (In upcoming post.)

Commercial and residential investment properties pose unique challenges to investors, but real estate agents - because of their experience and training - can help clients successfully navigate the purchase process.

Investors should seek a knowledgeable agent who has experience dealing with the types of investment properties they are considering.  The agent should determine the needs, goals and objectives of the investor. The groundwork can be laid at an initial meeting with the agent.

After the initial meeting, the real estate agent should be able to give investors a list of potential properties that meet their criteria. From these, a series of showing appointments will be scheduled to further narrow the properties. The hope is that these first showings result in the investors finding their ideal property. The reality is that the investors may have to repeat this process several times.

Once a property is selected, an offer is drafted. This is where a real estate agent’s training, experience and education really come into play. Commercial property offers more challenges than residential sales, so a professional can offer timely advice concerning conditions and clauses in the sales contract and can guide investors through the negotiation process.

Real estate agents can prompt and guide investors through the steps of a sale. Agents can help find professionals to deal with conditions of the sale and other issues. They can also make sure that issues are dealt with before the final closing date, cutting off potential problems before they arise.