Can You Build Wealth by Rezoning Your Property? Yes! Here’s How

Can You Build Wealth by Rezoning Your Property? Yes! Here’s How

5 min read
Kevin Perk

Kevin Perk is a full-time buy and hold and fix and flip real estate investor with over 15 years of experience. He and his wife Terron operate Kevron Properties, LLC, a boutique real estate investing company in Memphis, Tenn.

Experience
Kevin was a past president and is a current board member of the Memphis Investors Group. He’s also a blogger and writer who has authored hundreds of real estate investing articles on BiggerPockets and his own blog, SmarterLandlording.com, some of which have been featured on The Motley Fool and MONEY: Personal Finance News & Advice.

Kevin is also host of the SmarterLandlording podcast.

Originally from the Washington D.C. area, Kevin moved to Memphis to attend graduate school at The University of Memphis. After receiving his master’s degree in City and Regional Planning, Kevin climbed the planning career ladder to eventually become planning director of a county in the Memphis metro area. He “retired” from planning in 2003 to pursue real estate investing full-time.

Since “retiring,” Kevin’s main real estate investment strategy has been to buy and hold, otherwise known as landlording. Generally working in historic Midtown Memphis, Kevin is also known to fix and flip grand, historic homes when the right opportunity presents itself. He and his wife Terron (who is the principal broker at Perk Realty) have participated in dozens of real estate transactions in the Memphis metro area.

Kevin has the heart of a teacher and believes in helping others through education. An instructor of college-level geography for over 25 years, Kevin also regularly participates in seminars and panel discussions at such forums as the Memphis Investor’s Group and the Single-Family Rental Summit.

In addition, Kevin has been interviewed in publications such as the Memphis Commercial Appeal, the Memphis Daily News, and the Foreclosure News Report.

Education
Kevin earned a master’s in City and Regional Planning from The University of Memphis.

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Cities and neighborhoods change over time. When the needs of a community change, the local government will rezone an area and change the zoning classification. What was once farmland, for example, is now a community filled with brand-new houses, shopping centers, and industrial parks.

Property rezoning can be a lucrative opportunity for landowners to convert their property. They can build an apartment building in a historical district or take a parcel of land and build a shopping center in a rural area. But there are many considerations and a whole property rezoning process to go through to get it done.

What is zoning?

Zoning is a set of laws that control land use. The primary function of zoning is to regulate what can be done with a piece of property. Zoning districts dictate where various land-use activities, such as residential, commercial, or industrial, can be located. Zoning can regulate other things, such as density, height, yard setbacks, and so on. However, the use of the land is the primary concern.

Why change the zoning?

The main reason to change the zoning is that the landowner sees an opportunity. What opportunities are there? It could be to develop a residential subdivision, build an apartment building, or convert a house into an office. It could be a myriad of other things. The opportunity, however, may not be permitted under the current zoning law. Thus, the landowner will have to petition to have that law changed.

How do you change zoning?

Changing the zoning can be difficult and costly. It can be a really complicated process depending on where the property is located. And there are no guarantees that the rezoning application will be approved. Landowners need to be aware of these facts going in.

Basically, it goes like this: The landowner petitions a governing board to change the zoning of a property. The difficulty and costliness arise, in part, because there are no standard zoning ordinances. Every city, every town, and county with zoning can make up its own permits, laws, restrictions, and processes. Even cities right next door to each other can have widely varying zoning laws. Changing the zoning is also a political process. There are public hearings, and you have to get legislative approval. The political process can be quite costly—and ugly.

Because every place is different, I can only write in very general terms how to go about changing the zoning of your property. There even may be instances when attorneys will have to be involved in the process. There is simply no way any article could cover it all.

In general, here is what landowners need to do if they are thinking about changing the zoning on their property.


More on zoning from BiggerPockets


1. Look around the property

Are things changing around the property? Have circumstances changed in the surrounding property? Is there population growth? Is there a new road or sewer line that has changed local dynamics? The landowner, as the petitioner, has to justify the proposed change. Just because the landowner wants it done is often not enough of a reason. Some locales will give great deference to the landowner’s rights as a property owner, but many will not, and they will be quite restrictive. It’s best, therefore, to be able to justify the request with changing conditions.

2. Learn the local rules

Petitioners have to go online and read the rules. They have to find out what the current zoning is and what currently can and cannot be done. Then, they have to go and talk to the local planning department. The petitioner doesn’t have to be very specific in the beginning if they don’t want to be, but they should be aware that the staff can hold great sway in the days to come. The staff will review and make recommendations on the rezoning request. So petitioners should put their best foot forward.

3. Talk to your neighbors

If anything is going to stop you, it’s them. It is best to talk to them upfront about the plans and hash out any concerns. They will most likely get notified anyway, so the petitioner shouldn’t think they can keep things under the radar. The petitioner will want to make things as smooth as possible for the planning staff and elected officials, who will eventually vote on the request. Remember, however, that you cannot please everyone. Some will have a NIMBY (“not in my backyard”) attitude all the time, every time. But you have to try.

4. Apply to have the property rezoned

The planning staff will have the necessary forms and will be able to help and guide the petitioner. The petitioner should make sure to provide everything the planning department requests, which can be a lot. It may include things like surveys, maps, traffic studies, and mailing labels. And do not forget that there will be a fee to process the request. How much? That depends on the locale. Bet on at least several hundred dollars, if not several thousand.

5. Application review and staff analysis

The planning staff will review the request and develop an analysis and recommendation for the local planning commission and legislative body. The petitioner needs to be as much a part of this analysis as they can be. They should be available to help out. They have to provide everything and anything the planning staff asks for with a smile. The petitioner should meet them at the property during the site visit and show them exactly what the plans are. They have to tell the planning staff how they have already met with the neighbors and adjusted their plans accordingly. If possible, the petitioner should listen to the planning staff’s arguments and concerns and revise the plans to meet those concerns.

6. Planning commission meeting

Once the planning staff has completed its analysis, the request goes to the planning commission (or some similar body) to make a recommendation to the local governing body. This is a public meeting that will be advertised. The petitioner will need to be there to make their case and to answer any questions or concerns. Hopefully, the planning commission will give a positive recommendation, but the petitioner does not necessarily need one to go forward.

7. Legislative body meeting

Finally, the case goes before the local legislative body for a public hearing and vote. The petitioner will have the opportunity to speak and to make their case. If the vote goes their way, then they are good to go. If not, the petitioner may need to wait at least a year before trying again.

How long does the process take? It depends on the jurisdiction, the rules, and how complicated the request is. For something simple, it will take at least a couple of months—but six months to a year is not unheard of.


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Other considerations

The above seven steps are generalized and very simplified. There are a few other things landowners may want to consider when thinking about changing the zoning on their property.

Watch out for restrictive covenants

No matter what the zoning allows, restrictive covenants win. If the landowner spends the time and money to get a property rezoned for office use, but the covenants don’t allow it, they will lose. I’ve seen it happen. Not every property is subject to restrictive covenants, however. The landowner needs to know if they are subject to restrictive covenants and know what they allow before going forward.

Zoning is political

Politics can do strange things. Understand that politicians do not always make decisions based on what is right or best for the property owner. They make political decisions. If the request will create a political battle, it may be best to wait and try again later—say, after the election is over.

A consultant can guide you through the rezoning process

Because zoning can be a complicated and political process, the petitioner could benefit from hiring someone who understands the political turf. Although costly, a consultant may be necessary and well worth the expense.

Why go through this process?

Property rezoning can be very profitable. Understanding the zoning process is another arrow in an investor’s real estate quiver. It may help them see and create opportunities that others will miss.