Development Property Can Be Anything
Development property doesn't have to be vacant land or a large parcel. The potential for development exists whenever a property can be changed in some way so that it can be used differently. This can be a physical change, like building a new structure or demolishing an existing one. More frequently, you can't see the change that takes place.
You don't have to be a builder to be a developer. "Builder" and "developer" are often used interchangeably, but while developers can be builders, many never stick a shovel in the ground. What developers do is bring about some change in the property that significantly increases its inherent value.
To determine if development potential exists, your first step is to look at the current zoning map to see what zoning district the property is in and then to thoroughly review all of the applicable provisions in the current zoning ordinance focusing on what uses are permitted conditionally and by right.
There are many ways of getting development potential, and some are harder to achieve than others. Don't pin your hopes or money on changing the zoning because it's anything but a no-brainer. Depending on the particular state law, the municipal governing body may not have to change the zoning or even respond to your rezoning petition.
A variance -- another way of achieving development potential -- is often confused with a change of zoning. It doesn't change the property's existing zoning. What it does is grant relief from some requirement of the existing zoning ordinance applicable to the particular property, such as reshaping or resizing the building envelope (the portion of the property where you're allowed to build). However, getting a variance is not automatic and is only granted when property owners demonstrate that a hardship exists that they didn't create in the first place. Often the hardship is one relating to some physical characteristic or condition of the property. The hardship can't be an economic one.
Subdividing the property is a common method of increasing value. Usually, but not always, the total value of the property is greater if you can divide it into 2 or more parcels. You buy a parcel for $150,000 and create a total of 3 properties through subdivision. If the market value of each parcel is $65,000, you'd realize a gain, before costs, of 30% on your original investment.
But the real question isn't does the property have development potential because most do. The critical question you should ask yourself is: would development of this property make economic sense.
Good article Nancy.
I've never thought about dividing existing property to create higher values.
Thanks
I've been waiting for you to come and start posting comments and articles more often. Your presence will also promote better your book. Can you do that?
Alex
Alex,
Thanks for your comment. I hope you had a chance to read the article "Thinking like a Builder: Part 1" and that you found it helpful. I've already submitted "Part 2" which should appear soon.
Nancy
Yes I did and I did have 2 questions.