Planning to buy a real estate property? Whatever your plans may be, you need to think about rezoning property if your project does not align with the property’s current zoning classification. Rezoning property involves amending land or property’s zoning designation to accommodate for your future plans. But what does this mean, in practice? And why is it critical for real estate investments? Continue reading to find out more.
What Does Rezoning Property Mean?
Coming from our experience in Austin property management, we know that rezoning property is the process of amending the current zoning designation of a specific land or property. But how does this work?
Let’s start with defining what zoning is. Zoning laws and regulations are the rules that the local government puts in place in order to dictate and control how land is used in specific zones or areas. The zoning classification basically dictates what you can and can’t do (such as building an industrial factory in the middle of a residential neighborhood). It also covers key design and construction considerations, including the maximum building height, setback requirements, allowed density, signage, and other relevant details.
Now, where does rezoning fit in this equation? Well, rezoning happens if a landowner wants to change their property’s zoning classification in order to accommodate future plans and developments. Simply put, rezoning is necessary if you plan to develop, redevelop, or use a property in a way that is not permitted under its current zoning classification. For example, you have to apply for rezoning if you’re planning to demolish a single-family residential property to make way for a multifamily housing project.
Why Investors Rezone Properties
As a commercial real estate investor, zoning and rezoning will play a critical role in your development plans. Even if you already have a commercial zone designation, you must meet zoning requirements (and rezone if needed) before you put any of your construction plans into motion.
But why? Aside from legal compliance, investors generally rezone in order to grab income opportunities and maximize returns. For example, rezoning allows you to convert a low-density residential property into a larger housing complex or even for mixed-use businesses. This strategy, therefore, allows you to utilize the property for a higher-value purpose.
Similarly, rezoning such properties provides you with an opportunity to align with the current real estate market – whether it’s a booming economy, a growing demand for residential, or more. Moreover, rezoning typically leads to a higher property value later on.
How to Start the Rezoning Process
With all of these in mind, you might be wondering how you can start the process of rezoning a property. Let’s say that you want to invest in a property in Austin and you’re wondering if you need it rezoned for your plans. Then, the first thing you need to do is to look into your property’s zoning and verify if its current designation meets your construction needs.
If it doesn’t, your next step is to start the rezoning procedure. The process and requirements for rezoning can differ depending on location. Still, to give you an example, here’s how the zoning/rezoning application process in Austin, TX, works:
- Submit a zoning/rezoning application form and wait until a city liaison is assigned to your case
- Within 14 days of your application submission, the city will send a notice to land and property owners within 500 feet of your property, letting them know about your plans to rezone.
- City officials will study your proposal and review the city’s zoning plans. Then, they will submit a recommendation regarding your request, considering the comments of neighboring properties, land use principles, and real estate expert opinions. This report is available for review to the applicant and the public for a couple of days. Then, the case is scheduled for a hearing with the city’s Planning Commission (PC or Zoning and Platting Commission (ZAP).
- The city notifies the applicant and the parties within 500 feet of the property of the scheduled public hearing with the city’s PC or ZAP. Keep in mind that the land use commission takes around 6 to 7 weeks from the date the application is submitted to hear your request.
- A public hearing with the land use commission is conducted to review the staff’s report and hear out the concerns of neighbors, utility customers, registered environmental and neighborhood organizations within 500 feet of the rezoning applicant’s property.
- After the hearing with the city’s land use commission, a notice will be sent out to the applicant and the parties involved no later than 16 days before the scheduled hearing date for the City Council meeting.
- A second public hearing is scheduled with the City Council to review the recommendations from the land use commission. This is when the application receives its approval or denial. It’s also possible for the case to be approved with conditions.
Again, this is just the process for Austin, and what you’ll experience (like timelines) can vary by location.
What are the Costs of Rezoning Property?
Another key factor that you need to know about is the estimated cost of rezoning a property. To set your expectations, the cost of rezoning property can reach a couple of thousand dollars to cover application fees, professional fees, permits, surveys, and other services. So, it’s important to take this into consideration when you prepare your budget and finances.
For example, the cost of applying for rezoning property in Austin, TX, depends on the size of the property. Rezoning a property under 0.25 acres can cost a minimum of around $4,600, while land that is more than 10 acres likely will incur fees of at least $7,000. These include payments for the application fee, public notice, development services surcharge, signs and posting, and land use reviews.
However, this is just a bare-bones baseline. Aside from these, another big expense you need to take into account is the number of professionals that you need to have on your team. Generally, you will need an attorney to handle the legal aspect of the rezoning process. And aside from that, you need industry experts (a planner, engineer, etc.) who will serve as your consultants throughout your investment project. This can rack up thousands of dollars.
Risks of Rezoning Property
We’ve talked about the reasons why investors rezone properties. But in order to have a complete understanding of this strategy, it’s also important that you take into account the possible risks and challenges in doing so.
First and foremost, rezoning applications aren’t always approved. So, even if you go through the whole process (and pay the fees), there is a chance that your property will be denied and won’t push through.
Similarly, a delayed approval can also be considered a risk because even if your application is approved, the extended timeline leads to more fees (taxes, consultations, and financing) for you to cover while waiting for the city council’s decision.
Another persistent risk in rezoning property is community backlash. If the local community has organized and well-funded opposition to your project, that could prove hard to overcome. Not to mention, this could easily sway the council’s decision in approving or denying your rezoning application.
Aside from that, the legal process of rezoning property tends to be complex to navigate. There are many legal requirements that you need to follow throughout the duration of your project. If you fail to check these boxes, you may face fines ranging from a couple of hundred dollars up to thousands. Not to mention that serious violations can get you barred from future permitting and put a mark on your reliability and credibility. That’s another reason it’s so critical to retain legal counsel throughout this process.
Partner With BMG for Your Property Management Needs
Rezoning property into commercial real estate is the first step to opening it for more development opportunities. Whether you want to transform an old building or expand an already existing structure, you’re legally required to get your property rezoned if your plans are not permitted under its current zoning class.
Meanwhile, if you plan on making your property a rental, you’ll need to get all your ducks in a row for that stage, too. That’s where home rental management companies like us come in. At Bay Property Management Group, we can take over the day-to-day aspects of running a rental, from lease drafting, inspections, to rent collection, to accounting, maintenance, repairs, and more. Our professionals have years of experience managing over 6,000 rentals in Texas, Maryland, D.C., Pennsylvania, Northern Virginia, and more, so you can rest assured your investment is in good hands.
Want to get started? Contact us today!
