Will commercial zoning increase your property value?

If you have the right mix of items and you have a big enough pocket, this may be your ticket to retirement. But sometimes, it’s your ticket to the poor house.

I looked at a house that is zoned for mixed use. In this area, this means that you can use the residence as a home or use the residence as a business site. These types of sites are generally limited to low-impact features such as office buildings, apartments, etc.

What’s the trick? Well, you’ll need to own a large enough parcel of land for a business deal to work. That’s why you see five houses along a busy street, all for sale at once, and the zoning is commercial. This is because for commercial development to be approved, there must be a parcel large enough for commercial development to function.

Typically, for mixed residential zoning, these areas are near the city or near other apartments or businesses in the area. I have appraised several of these types of property. Many times, announcing the zoning as mixed use is enough to sell the house for more just because it can attract that specific buyer who wants to live in the same house and run a business out of the house. One home I reviewed offered a living room on the main level and a naturally lit basement offered office buildings for rent.

I understand that some banks that specialize in residential zoning will not lend money on mixed-use properties. This, of course, is a disadvantage if you are trying to get a home loan. Some buyers will not want to use their residential home for office use. This will limit the number of buyers who may want to purchase your home.

So will commercial zoning increase your property value? If your home is a residential home best used as a residential use, commercial zoning can lower your home’s value and make it harder to get a loan and sell, because it will be located on a busy street. If your home is for residential use and the highest and best use is to build a commercial structure, most of the time, your land used for commercial use will be more valuable than your home for residential use.

So the moral of the story is to keep an open mind about these types of properties. I looked at some houses the other day where the house is an older residential house with a larger lot. Zoning can be changed from residential to commercial for $1,500. Residential homes on larger lots with similar zoning were selling for between $350,000 and $400,000. Residential homes that were converted to commercial zoning were selling for between $500,000 and $700,000. So for $1500 and some time, this would be a good bang for your buck.

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