Does zoning increase value for investors?

Question

I came across a deal where the property was zoned R2 and CR. Currently there is only one tiny single family house on the lot. I was curious if the fact that the lot is zoned both R2 and CR would be of greater value to investors?

If you were wholesaling the deal could you assign more for the contract? Or if you were an investor would you pay more for that zoning?

Any insight is appreciated! Thanks!

Jeremiah Struble · Answer

Awesome. I appreciate the input. I guess now i would assume it would be hard to guess that value for either an assignment or total ARV. 🤷🏽‍♂️

Matt Everling · Answer

@Jeremiah Struble The change in zoning from residential to commercial or mixed use absolutely increases the value of the land. Significantly. This is called up-zoning. I am a City Planner and used to process entitlements for developers of raw land in Phoenix, AZ from residential to commercial, industrial, mixed use multifamily, etc. Once the City Council adopts an Ordinance approving the Zone Change and General Plan Amendment, pending an appeal, becomes law in 30 days.

David Denzy · Answer

@Jeremiah Struble

Hey Jeremiah,

In my experience doing site search across the Midwest for a developer, R2 and CR mean different things in different counties/cities. But to answer your question- there’s a good possibility that a property can be sold at a premium if it’s zoned for commercial/multi family use. While I was working for a developer, we would search for multi-family zones in towns and cities across the midwest and would offer well above market value to homeowners sitting on that land. However, please be aware that cities and towns can change zoning from year to year.