Zoning issue

General Real Estate Investing
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Zoning issue

Aaron Carter
Real Estate Agent · Bemidji, MN · Member since 2014 · 59 posts · 11 votes

Long story short...

Found a property that used to be a large foster home, currently vacant. Seller is from out of state. The floor plan is perfect for a triplex after a modest remodel. Currently a 10 bed, 4 bath, 4500 square feet. I know the rates for rentals in this area and feel that I could get $1200 for the 4 bed 2 bath unit and $900 for each 3 bed 2 bath. Oh, and it is in GREAT condition, requires very minimal cosmetic work. Would need to install one kitchen.

List price is 139,900. I think I could get it for $127,000 but will assume $139,900 purchase price.

Assumed with 8% vacancy rate:

20% down and $10,000 in improvements.

Estimated NOI: $24,540

Cash flow: $17,330

Cash ROI: 41.78%

It is a great deal with a great return, so I anxiously drove to the city office to find out more information about the property. They explained to me that it is not zoned multifamily therefore I could not separate the units or consider a variance.

However, they were kind enough to give me a few options... I could rent it out as a single family, start a charter school out of it, or rent out one unit and use the rest of the place as an in-home day care as long as one of the tenants was employed at the day care...

So they would let me put a SCHOOL there but not put up three walls for a multifamily...

I live in a rural area and I do not see any other use for this property. So it will likely sit on the market for quite some time vacant...

Looking for some advice or simply someone sympathize with my frustration...

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Leon D.
Investor · Chicago, IL · Member since 2012 · 190 posts · 85 votes
12y
Just because it's not currently zoned multifamily doesn't mean you can't apply to have the zoning changed, or at least be granted a variance.
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  • Jason Hershey
    Commercial Landlord · Duvall, WA · Member since 2014 · 4 posts · 1 vote
    12y

    Have you read the zoning matrix and zoning descriptions for yourself? Its just that in many places, single family zoning might still allow a duplex or triplex. I would want to know 'for sure'. Most cities have a zoning matrix, which is basically a table that says what is allowed in various zones. You'll also want to check the definitions for the specific zone for that property to see exactly what it says.

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  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    12y

    @Aaron Carter You will have to try to find a use that works with the zoning. Sometimes with larger homes you can rent rooms to seniors, college students, etc. If it's not zoned multi family, trying to get them to budge on the zoning is like yelling at the wind, it does no good, and wastes your time.

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  • Aaron Carter
    OP
    Real Estate Agent · Bemidji, MN · Member since 2014 · 59 posts · 11 votes
    12y
    Originally posted by @Karen Margrave:
    @Aaron Carter You will have to try to find a use that works with the zoning. Sometimes with larger homes you can rent rooms to seniors, college students, etc. If it's not zoned multi family, trying to get them to budge on the zoning is like yelling at the wind, it does no good, and wastes your time.

    I actually planned on renting it to college student because that is my most profitable demographic. However, the city code states that not more than 4 unrelated people can live in one unit.

    I have looked at the matrix for the zoning, unless I wanted to do something more commercial there is not any money to be made. I guess I will just have to pass and forget about it. Thanks for the input!

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    12y

    Never heard of a P&Z office say that you can not apply for a variance! That is the common procedure to take the matter to the P&Z Board. However, they usually want the P&Z office to sign off as board members aren't usually zoning experts but elected or appointed, so it's political.

    Wall it up, put double doors in some low traffic area, like those used in motel suites between rooms, lock them, if neighbors want to chat the can open them, if not they can keep them locked on their side. No different than locking a bathroom or bedroom door. In most cases, they can't control interior floor plans.

    Apply for your school designation and lease as they suggested to keep them happy. :)

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  • Leon D.
    Investor · Chicago, IL · Member since 2012 · 190 posts · 85 votes
    12y
    Just because it's not currently zoned multifamily doesn't mean you can't apply to have the zoning changed, or at least be granted a variance.
    1Reply
  • Aaron Carter
    OP
    Real Estate Agent · Bemidji, MN · Member since 2014 · 59 posts · 11 votes
    12y
    Originally posted by @Bill Gulley:
    Never heard of a P&Z office say that you can not apply for a variance! That is the common procedure to take the matter to the P&Z Board. However, they usually want the P&Z office to sign off as board members aren't usually zoning experts but elected or appointed, so it's political.

    Wall it up, put double doors in some low traffic area, like those used in motel suites between rooms, lock them, if neighbors want to chat the can open them, if not they can keep them locked on their side. No different than locking a bathroom or bedroom door. In most cases, they can't control interior floor plans.

    Apply for your school designation and lease as they suggested to keep them happy. :)

    I think it is ridiculous. I discussed this with the assistant city planner who said that there are things that a variance would cover, addressing such issues as parking which is also a concern with this property. Currently only four off street parking spaces, city code requires one off street parking space for EVERY BEDROOM. There is plenty of yard space for at least eight more parking spaces and plenty of off street parking.

    However, I was told that a variance would not address the zoning issue.

    I agree with your solution of putting up double doors, there is already a common area available. Honestly, all the work that needs to be done is one wall, three doors, and a kitchen in one of the units, as there are already two kitchens in the building. It is also only three blocks from the local technical college and three miles from the local university, so HUGE demand in areas like this.

    I just looked up the matrix for the zoning as was mentioned in a previous post and I DID find that a sorority or a frat house is permitted under conditional use... This would be a GREAT solution. So I am assuming I would need to apply for a permit...

    Going to e-mail the city planner to make this suggestion but I think they are still going to stick it to me regarding the parking issue...

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Aaron they don't give a crap about what you think will make you the most money. They care about what they want to see there. Zoning can be loosely interpreted and if they do not like a loophole you found they can move to shore it up or change it.

    They can look long and hard to find SOMETHING to deny your request.

    The bottom line to all of this is if you can't use it for your intended highest and best use then walk. I don't like their suggestions and it would be a non-starter to deal with the headache they have suggested. You can make your purchase conditional on getting all the approvals before closing but you would need to figure out the time involved and cost to see if it's worth it if you lose.

    There is an opportunity cost lost with also money that has to be factored.

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    1Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    12y

    @Aaron Carter I agree with @Joel Owens walk away.

    I had a similar situation. I own a 4600 sq. ft. house and guest house on 20 acres, within 1/4 mile to a community college, a private Christian college and a large school of ministry. Plus the area draws tourists to the lakes, mountains, etc.All the other properties around ours are 2 acre lots.

    The zoning around allows for Bed and Breakfast Inns, with 4 rentable rooms. I wanted to do one with more rentable rooms, seeing as how my property was much larger, was designed to hold 50 cars, has a driveway that is 2 lanes, and is perfect for the use. But because the zoning code states 4 rentable rooms with a bed and breakfast they wanted me to apply for a zoning change (which they didn't know if I'd get) for a hotel. Well I didn't want that type of use, as it would have gotten away from the Country Inn feel I wanted with the regulations required. I just had to walk away.

    In some areas the Planners are workable and give leeway, some not. I can understand in a residential area people not wanting houses packed with tenants, and overflow parking, etc. as it changes the character of the neighborhood, and when those people bought their properties, they bought thinking it was a SFR area.

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  • Aaron Carter
    OP
    Real Estate Agent · Bemidji, MN · Member since 2014 · 59 posts · 11 votes
    12y
    Originally posted by @Karen Margrave:
    @Aaron Carter I agree with @Joel Owens walk away.

    I had a similar situation. I own a 4600 sq. ft. house and guest house on 20 acres, within 1/4 mile to a community college, a private Christian college and a large school of ministry. Plus the area draws tourists to the lakes, mountains, etc.All the other properties around ours are 2 acre lots.

    The zoning around allows for Bed and Breakfast Inns, with 4 rentable rooms. I wanted to do one with more rentable rooms, seeing as how my property was much larger, was designed to hold 50 cars, has a driveway that is 2 lanes, and is perfect for the use. But because the zoning code states 4 rentable rooms with a bed and breakfast they wanted me to apply for a zoning change (which they didn't know if I'd get) for a hotel. Well I didn't want that type of use, as it would have gotten away from the Country Inn feel I wanted with the regulations required. I just had to walk away.

    In some areas the Planners are workable and give leeway, some not. I can understand in a residential area people not wanting houses packed with tenants, and overflow parking, etc. as it changes the character of the neighborhood, and when those people bought their properties, they bought thinking it was a SFR area.

    Appreciate the advice, I will pass on the property. Thanks.

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