3 Ways Knowing Zoning Pays Off – Big Time

It’s a tough market out there for Multifamily investors who are trying to expand. Low inventory and soaring prices have many investor looking for creative ways to still find increased profit margins. 

Many great ideas have breathed their last at a township zoning meeting where they are shut down and may have been on life support after a call from zoning officer.

 If you know the zoning and what to look for, you can find creative ways to get the deals, and live to see a profitable day. 

Here are several ideas, and what to consider from a Zoning standpoint before you take the plunge:

1. Converting Old Brick Warehouses into apartments. Seems like a great idea, right? They have great Industrial vibe with exposed brick walls and big windows. Consider:

  • Does the zoning permit Apartments in the district? If not, you would be fighting an uphill battle to change.
  • If apartments are permitted, at what density? Often there are restrictions on how many you could fit on one site.
  • Is there sewer capacity to provide the connections necessary for your unit count? Often this can be one of the largest constrictions.
  • Is there parking, ADA accessibility for some units, emergency access points, and so on? These items make constrict the development more than any of the others. 

2. Boarding Houses with the shortage of housing inventory on the market, especially for those in the affordable category, this has become a product that helps to fill that void. Consider:

  • Zoning use- Boarding House is always a separate category from apartments. Many municipalities only permit if OWNER occupied. Other townships will not have those restrictions but may limit the number of permitted rooms for lease.
  • Fire Code- to convert to what is usually considered a ‘Group Use’ then it will require proper fire alarm, possibly sprinklers and/or fire escapes. 
  • If outfitting a building with sprinklers- the size of the water line going into the property would need confirmed, as a larger water line is needed to run a sprinkler system.

3. Short Term Rentals (Air BnB, VRBO, Executive Rentals) Easy way to make a larger cash flow, right? Consider:

  • Many Zoning codes may dictate the length of permitted stay, and restrict to those greater than 30 days, to prohibit short term rentals. However, if you are leasing 30 days or more with a fully furnished rentals, this can still be a profitable location for ‘Executive Housing’. This includes traveling nurses, and other professionals who need furnished rentals. With COVID expanding remote work, some may choose to live elsewhere for a time while working remotely and furnished rentals make it possible. 
  • Look for commercial zoning to avoid restrictions on length of stay- some may permit “Bed & Breakfast” which open the door for a short-term rental situation of less than 30 days. 
  • Occupancy taxes: most municipalities will require occupancy taxes collected and remitted for stays of less than 30 days. Be aware of these restrictions and collect. Air BnB will collect and remit on your behalf, but the municipality may still require you to file a report each month to make sure it lines up with the remitted taxes.

There is always value to be found for those who want to keep their dreams alive. Be smart about how you grow your portfolio by knowing the rules and making them work for you. 

Want to explore these ideas and find your next opportunity? Call us to discuss these options and how we can help you find the next profitable new deal. 

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