When you’re looking at a property that you intend to invest in, it’s important to look at the local zoning ordinance or codes to get an understanding of what can be built on the lot.
Even if your intention is to own a property for longer periods of time, you would be foolish to turn a blind eye completely to potential opportunities for expansion or the potential for new construction that maximizes the zoning profile of the lot.
As a developer looking to build a new construction property from the beginning or add an addition to an existing property, it’s far more crucial. You need to get a better grasp of all sides of zoning before I would advise you to take on a new construction project. In this article, we’ll go over some key tips that will help you get a better grasp of how zoning can impact your development or addition projects.
1. By-Right Projects:
A good place to start for this topic is to discuss the concept of by-right projects.
These are projects where you do not need any special permission to construct the building. If your proposal follows the zoning code, you should be able to simply submit for your building permit and acquire it without any kind of specific approval process.
Of course, if you are in a historic district, conservation area, or other area with additional restrictions, then you can’t say you have a true “by-right” project even if you meet the other parts of the zoning code. By-right projects are a great place for newer developers to start.
My first development project was renovating an existing two family and enlarging the units while adding a third unit. We increased the overall building size by 60% and completely gut renovated the existing structure, so this was a nice transitional project into new construction development that did not require any special kind of permission to build.
One thing to keep in mind is that it is often difficult to find projects like these in areas with very strict zoning codes. In urban areas of the northeastern United States, it’s not uncommon to find that most existing buildings do not even comply with the zoning code anymore.
As we discussed in our Offer and Contract Contingencies for Real Estate Explained article, if your project does require some kind of special permission and thus isn’t by-right, you can still protect yourself by having contingencies in the contract that allow you to walk away if you do not receive the entitlements you require.
2. How Strict Is Your Area’s Zoning Code?
Some regions of the country have extremely strict zoning regulations, whereas others have next to none.
No matter what, you’re going to be bound by regulations of some kind, and at the very least being held to the building code.
If you’re new to investing in the area, assume that the zoning code is strict before you make any kind of investments. You need to confirm if your area is actually lax before you put you or you investors’ money on the line.
On the other hand, don’t assume that because your area has a very strict zoning code that there aren’t some deals out there that allow for a profitable by-right project. These are usually properties that have been under the ownership of the same family or group for decades.
3. Use Regulations:
As we discussed in our 5 Steps to Real Estate Condominium Development article, among several others, the Use Regulations section of your zoning code is going to be one of the first places you need to look before you get too ahead of yourself.
Looking to build an apartment building?
You better be sure the zone you are in does not strictly forbid that use. Remember that many municipalities have an in-between step where they will designate a specific approval process for a specific use type.
For example, perhaps in the Business-C zone of the city you’re investing in allows apartment buildings as a conditional use. They will then have a process in place to judge those projects and there is less uncertainty than if you were attempting to appeal a use type that was strictly forbidden in the code.
Many zoning codes will use three classifications for their use regulations table: “A” for allowed, “F” for forbidden, and “C” for conditional.
4. Dimensional Regulations:
In our 10 Crucial Due Diligence Steps for New Construction Development we discussed the importance of reviewing your zoning code’s dimensional regulations section.
As the name implies, these are the rules that control what size of a building and how many units can be included in it.
During your original due diligence period you and your architect will need to carefully review these regulations to inform the design of your building.
Things to look at here are:
- Minimum Lot Size
- FAR or Lot Coverage Percentage
- Setbacks
- Maximum Height/Stories
- Open Space Requirements
- Minimum Frontage
We discuss this topic in depth in our Millions through Multi-Family Development E-Book.
5. Parking Regulations:
One of the easiest ways to get tripped up might be in how many parking spaces your property must include. This might seem like an afterthought, but if you need a certain amount of the lot as building area and you didn’t realize you need two parking spaces for every residential unit, you might end up in trouble.
We touched on this topic previously in our Five Tips for Targeting High Density Zoning Areas for Long-Term Real Estate Investing article. Make sure you do not estimate the amount of living area incorrectly by neglecting to review the amount of parking you are required to include.
Especially important for beginner developers that might be dealing with smaller urban infill lots is to make sure your property is wide enough to allow for the proper turn radius required to back in and out of the parking space. As a very rough rule of thumb, if you’re including an enclosed garage, you should ideally have 50 feet of lot width to support the turn radius.
When you’re looking at a property that you intend to invest in, it’s important to look at the local zoning ordinance or codes to get an understanding of what can be built on the lot.
Even if your intention is to own a property for longer periods of time, you would be foolish to turn a blind eye completely to potential opportunities for expansion or the potential for new construction that maximizes the zoning profile of the lot.
As a developer looking to build a new construction property from the beginning or add an addition to an existing property, it’s far more crucial. You need to get a better grasp of all sides of zoning before I would advise you to take on a new construction project. In this article, we’ll go over some key tips that will help you get a better grasp of how zoning can impact your development or addition projects.
1. By-Right Projects:
A good place to start for this topic is to discuss the concept of by-right projects.
These are projects where you do not need any special permission to construct the building. If your proposal follows the zoning code, you should be able to simply submit for your building permit and acquire it without any kind of specific approval process.
Of course, if you are in a historic district, conservation area, or other area with additional restrictions, then you can’t say you have a true “by-right” project even if you meet the other parts of the zoning code. By-right projects are a great place for newer developers to start.
My first development project was renovating an existing two family and enlarging the units while adding a third unit. We increased the overall building size by 60% and completely gut renovated the existing structure, so this was a nice transitional project into new construction development that did not require any special kind of permission to build.
One thing to keep in mind is that it is often difficult to find projects like these in areas with very strict zoning codes. In urban areas of the northeastern United States, it’s not uncommon to find that most existing buildings do not even comply with the zoning code anymore.
As we discussed in our Offer and Contract Contingencies for Real Estate Explained article, if your project does require some kind of special permission and thus isn’t by-right, you can still protect yourself by having contingencies in the contract that allow you to walk away if you do not receive the entitlements you require.
2. How Strict Is Your Area’s Zoning Code?
Some regions of the country have extremely strict zoning regulations, whereas others have next to none.
No matter what, you’re going to be bound by regulations of some kind, and at the very least being held to the building code.
If you’re new to investing in the area, assume that the zoning code is strict before you make any kind of investments. You need to confirm if your area is actually lax before you put you or you investors’ money on the line.
On the other hand, don’t assume that because your area has a very strict zoning code that there aren’t some deals out there that allow for a profitable by-right project. These are usually properties that have been under the ownership of the same family or group for decades.
3. Use Regulations:
As we discussed in our 5 Steps to Real Estate Condominium Development article, among several others, the Use Regulations section of your zoning code is going to be one of the first places you need to look before you get too ahead of yourself.
Looking to build an apartment building?
You better be sure the zone you are in does not strictly forbid that use. Remember that many municipalities have an in-between step where they will designate a specific approval process for a specific use type.
For example, perhaps in the Business-C zone of the city you’re investing in allows apartment buildings as a conditional use. They will then have a process in place to judge those projects and there is less uncertainty than if you were attempting to appeal a use type that was strictly forbidden in the code.
Many zoning codes will use three classifications for their use regulations table: “A” for allowed, “F” for forbidden, and “C” for conditional.
4. Dimensional Regulations:
In our 10 Crucial Due Diligence Steps for New Construction Development we discussed the importance of reviewing your zoning code’s dimensional regulations section.
As the name implies, these are the rules that control what size of a building and how many units can be included in it.
During your original due diligence period you and your architect will need to carefully review these regulations to inform the design of your building.
Things to look at here are:
- Minimum Lot Size
- FAR or Lot Coverage Percentage
- Setbacks
- Maximum Height/Stories
- Open Space Requirements
- Minimum Frontage
We discuss this topic in depth in our Millions through Multi-Family Development E-Book.
5. Parking Regulations:
One of the easiest ways to get tripped up might be in how many parking spaces your property must include. This might seem like an afterthought, but if you need a certain amount of the lot as building area and you didn’t realize you need two parking spaces for every residential unit, you might end up in trouble.
We touched on this topic previously in our Five Tips for Targeting High Density Zoning Areas for Long-Term Real Estate Investing article. Make sure you do not estimate the amount of living area incorrectly by neglecting to review the amount of parking you are required to include.
Especially important for beginner developers that might be dealing with smaller urban infill lots is to make sure your property is wide enough to allow for the proper turn radius required to back in and out of the parking space. As a very rough rule of thumb, if you’re including an enclosed garage, you should ideally have 50 feet of lot width to support the turn radius.
