Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
I have a potential deal and am wanting to cover my bases. I have a property that could be used as a private residence and is zoned industrial. As near as I can tell, residential use is allowed within the zoning code (I am verifying this with the City). I just want to make sure a qualified buyer can get conventional financing when I sell. This would be an ideal live/work situation and is the sweat spot (price and location wise) of our market.
I have looked at a few homes in your exact situation in Salt Lake. This will really depend on the zoning laws in your city but this is how they work in SLC. If a non-conforming use was established before the zone was created or changed then you can apply for a certification from the city. This cert is what a lot of banks will require to ensure that if the property is damaged beyond repair, by no intentional cause of the owner, that the building can be rebuilt. One house I looked at the city wanted to make sure that there wasn't a gap in residential use for no more than 365 days consecutively. If the city could prove that the home was either not lived in for a year or that it was used for any commercial use then they would deny the certification and traditional residential financing would be a lot harder to get.
Something else to keep in mind is that if I did change the use of the land I would need to bring the standards of the lot up to today's standards. One home I wanted would have needed a sewer line added and it was going to be a 500 ft run to the closest sewer. That was a deal killer for me and I walked.
Again this is my experience in SLC and I can expect some similarities but I make no guarantee to how Denver deals with their zoning.
You'll need to make sure that there are comps that are being used as residential with the same zoning. I had to deal with this sort of situation a few months back for a commercially zoned residential property. Didn't go through for other reasons, but the lesson was that the lender wanted 3 reasonable comps that had that same zoning and use.
@Michael De Rosa thanks for the reply. In this case, I would be converting the existing use (office/warehouse) to residential so no history. I found out today that the use (residential) is allowed under the zoning which I was pretty sure it was. Tomorrow I have to make a trip there and see if I can get the used changed from it's current use to residential.
@Dan Mackin great info to know. That was certainly something I wouldn't have thought of. There is residential diagonally cross the intersection so perhaps that would help. I doubt there are 3 comps for this property type with this zoning so that will be a hurdle. I'll start looking for that.
At any rate, if I can get the use changed I will do the deal. It's easily a 70% of ARV as a flip or about 1.5% if I have to keep it and rent it out. Now I have to get it done.
@Bill S. I had something like this years ago - it was in Commerce City - It was house on light industrial zoning, there were houses up and down the block with the same zoning. The feedback I got from the city was that if it burned down a house couldn't be rebuilt. Some what grandfathered in, but the long term plan for the area was to go industrial. I don't recall what that did for financing for an owner occ.
@Travis Sperr yes that used to be the case in Denver as well. I meet with the City yesterday and residential use is allowed under the current code. The kicker is that when I change the use I have to bring the building up to current building code for that use. The City just adopted the 2015 code which has all kinds of energy efficiency requirements. I'm probably looking at adding insulation and new windows among other things.
There is a new build just 2 blocks away which will definitely help with "selling" my concept to buyers.
The down side is the property is in the flood zone. I need to check out the impact of that. More to come.
@Bill S. What's the current use? If you're just changing the use you go through zoning, which is totally separate from Building...if it's a simple change of use that makes sense you may just need to fill out a form. I just recently did a change of use and it didn't require anything brought up to 2015 code..is this Denver?
@Dorothy Ma yes it is Denver. Currently the use is office/warehouse. I want to make it residential which would then allow for someone to go live/work with their specific situation. They (zoning) told me I had to bring the building up to current building code (for the new use) to change the use.