Increase Property Value through Change of Land Use
Go to: Previous Article Next Article
As investors, we all want to make the "highest and best use" of our property. In a technical real estate sense, this phrase refers to the use of a property that makes it the most valuable to a buyer or the market.
From a purely business point of view, it means one single use will result in maximum profitability through the best and most efficient use of the property. So, it definitely pays to know the various ways in which to change land use to get that maximum profitability. In this article, I'll describe several methods for achieving this objective.
Method 1: Assemblage This is the combining of two or more adjoining lots into one larger tract to increase their total value ("plottage"). You can more efficiently develop the larger tract and increase its value through redevelopment. For example, you might buy several small tracts and combine them into one large lot in order to build a multi-unit apartment building or a commercial structure.
Method 2: Lot Splitting This is the opposite strategy of assemblage. You take a large tract of land and divide it into several smaller tracts. The result is that you can receive a much larger income than you would if you kept the land as-is. One common technique is to split a large tract into several tracts and put small multi-unit (1-4) residential properties on each. This way, you get more favorable financing as well as income.
Method #3: Conversion of Use This is simply taking the use of a property and converting it to another use. An example is buying an old storage facility, renovating it, and then converting it into office space. In an ideal situation, you get the original property at a low price and gain the rewards of long-term income and appreciation.
Method 4: Zoning This can be a very profitable strategy in areas where there are growing populations. For example, assume your city is expanding outward toward agricultural land and you've identified this land as being in the path of progress. In real estate terms, this means the land becomes less productive; i.e., it now doesn't have its highest and best use. So, you buy the farm land and then get it zoned for residential, commercial or industrial use. Since it's in the path of progress, the land you purchased should leap upward in value, assuming you've done proper due diligence
The Disadvantages of Changing Land Use Often, the biggest obstacle to changing land use is dealing with local government organizations (planning departments) and local communities. Sometimes you run into communities where there's an anti-development attitude. If that's the case, you could have an expensive legal battle on your hands when seeking to change land use. The solution is to do your upfront research on the local conditions and attitudes. Find out if the planning commission and the community are pro-development or anti-development, and then make a decision as to whether or not to proceed.
Another potential disadvantage can be your own lack of knowledge. Assume, for example, that you buy a piece of land in order to attract commercial businesses and later find out it's zoned strictly for residential use. The key is to do your research and do it carefully so you avoid this situation altogether.
In conclusion, when you're involved in real estate investment, the changing of land use can be a valuable tool for increasing property value and income. The solution is to take the temperature of planning commissions and communities in order to determine their attitudes toward development before you ever proceed with your plans. If the attitude is pro-development, then you'll have relatively smooth sailing. If it's anti-development, you'll have to decide if it's worth the time and expense to fight the battle that's likely to ensue. As always, consider the situation in an objective manner.
Key Point: Keep a sharp eye out for changes in land use that can increase the value of your properties.
Article Source: Articlelogy.com
- Credit Cards A big selection of Cards in all flavors: Bad Credit Cards, Secured Cards, Prepaid Cards, Canada Cards, Low Interest Cards -
Word Count: 676
Reduce Your Debts Without Bankruptcy. See How Much You Can Save. Free Debt Analysis
