Rezoning a Residential Property Is a Great Strategy for Commercial Property Beginners
Many residential investors get excited about "graduating" to commercial, but they're not sure how to get started. If you're one of those investors, rezoning a residential property to a commercial property is a great "beginners" real estate investing strategy to consider.
The best way to execute this strategy is to look for a single-family home on a busy street. (Finding one at a busy intersection is even better.) Why? Because single-family homes on busy streets are not very desirable as homes--but they are very desirable as office space.
Once you find a house like this for sale, try to get it under contract. This is usually not a difficult negotiation. Why? Because real estate agents and owners have a difficult time selling these houses. What once was likely an adorable house with a big yard, has seen the traffic increase, sidewalks put in for pedestrians, and the road widened. As a residence, houses on busy roads just aren't very appealing (for these very reasons).
But as office space--as a business--it's ideal.
Visit the City Planning Office
Once you get a property under contract (or at least under negotiations), go to the city planning office. Simply take a number and stand in line. Tell the clerk, "Hi, I have a property under contract. It's on the corner of First Street and Central Boulevard."
The clerk will look it up and say, "Okay, what do you want to do?"
Explain to them that you need to know if you can rezone the property from single-family residential to office space commercial. You may have to wait a bit, but you'll usually get your answer that very day. After all, this is not an unusual request for them. In fact, it's very commonplace. Investors do this successfully all the time in cities around the country.
Keep in mind, there's no guarantee they'll say yes. But in general, the only thing that may hinder your ability to rezone is limited parking. Because it will now be office space, they have a predetermined amount of parking spaces they'll require you to have. (Sometimes it may just be a matter of sacrificing some of the yard for parking.)
Finding Tenants
Once the zoning change is approved, not only will you get better financing for that property, you'll have better cash flow--and you can actually lease it for more per square foot. And finding tenants will not be difficult. Attorneys, doctors, insurance companies, dentists, etc. all want a location like his because they want the busy traffic, they want to put up signs, and they want to pull people in off the street.
Let's say you purchase a house at full market value for $400,000. Once you get it rezoned, it would not be unusual for it to re-appraise for $600,000 or more. Now you've got instant equity so you can spend $40,000 or so to convert it to office space.
By the way, while you are waiting to close, you should immediately start advertising the space for rent. The best way is to put a sign out by the busy street. Suddenly, all that traffic outside becomes a benefit instead of a liability. You'll begin attracting instant attention from commercial tenants.
So if you'd like to get into commercial real estate investing, keep your eyes open for an undesirable house on a busy street. Multiple opportunities like this exist in every city across the country. Before you know it, you will have rezoned a residential property to a commercial one and will be on your way to becoming a commercial real estate investor.
You can also learn more at Trump University's Commercial Real Estate Investing retreat.
As an Owner of Commercial Property, Many Options Exist for You to Collect More Profit
For residential property owners, there's not much you can do to earn extra money from your property--aside from increasing the rent. But commercial real estate offers a variety of creative ways to increase your income.
Let's start with apartment buildings. If you own multi-family units or apartments, there are many amenities that can make you extra money. Perhaps there's a clubhouse you can rent out to tenants for parties. If your property is not big enough for a clubhouse, perhaps there's a common area, gazebo, or covered hallway for vending machines. Vending machines can not only make you a little extra coin, but your tenants will really appreciate the convenience.
Another way many property owners make money is with laundry machines. If you have old machines in your property, you can make a deal with one of the national laundry services. They'll replace all your machines with brand new ones, plus do all the servicing for you. They will typically charge you 50% of what the machines bring in, but what do you care? It's pure profit!
Billboards
Putting up billboards is another way to boost your bottom line. It wouldn't be practical to put advertisements on a single family house, but you could if that house was rezoned into commercial office space.
Consider a two-story house that's been converted to office space. If it's on a busy street, that's a prime place to put some advertising. A small billboard could literally make you an extra $25,000 a year, maybe more.
And what about strip centers or single building commercial? If you have a commercial property or parking lot that's big enough for a sign, perhaps you could add an advertisement to it. And the taller your sign, the more desirable (and visible) it is to marketers.
Antennas
Have you ever noticed all the antennas on top of hotels and office buildings? Some of them have so many, they resemble porcupines. Ever wondered why? The answer is simple: Money. Commercial property owners make money by leasing space to people who want to place antennas on the roofs of their buildings. Just one antenna on one building could net you $500 a month.
And the bigger the building, the greater the potential. When you have an apartment building or some other big building, another way to make money is to let people put up cell phone antennas. In fact, the higher the building, the more people will approach you to put antennas on top. Antennas make a lot of money for building owners without costing them a dime. It's pure profit, no expenses. What could be better than that?
So if you already own commercial property--or are thinking of making your first purchase--keep your mind open to the possibilities. As an owner of commercial real estate, many creative options exist for you to collect more profit from your investment.
You can also learn more at Trump University's Commercial Real Estate Investing retreat.
