If you have the right mix of items and have a big enough pocket, this could 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 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 items such as office buildings, apartments, etc.
What’s the trick? Well, you’ll have to own a large enough plot 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 in order for commercial development to be approved, there must be a parcel large enough for the commercial development to work on.
Typically, for mixed residential zoning, these areas are close to the city or close to other apartments or businesses in the area. I have appraised several of these types of property. Often times, listing the zoning as mixed use is enough to sell the home for more just because it can attract that specific buyer who wants to live in the same home and run a business out of the home. One home I evaluated offered a main level living room and daylight basement offered office buildings that were rented.
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 residential 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 buy your home.
So will commercial zoning increase your property value? If your home is a residential home with the best use as a residential use, commercial zoning may decrease the value of your home and make it more difficult to obtain 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 $1500. Residential homes with larger lots similarly zoned sold for between $350,000 and $400,000. Residential homes that were moved 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.