Zoning laws may affect the value of your real estate investment. There are three main zoning area, and these are residential, commercial, and industrial. Residential zoning applies to residences and multi family dwellings, commercial zoning usually applies to businesses, and industrial zoning normally applies to manufacturing shops and plants. Zoning laws will vary from area to area and city to city, so make sure that you know the zoning restrictions on any real estate before you invest.
The purpose of zoning laws is to specify what types of dwellings or businesses may reside in a certain area. Obviously you would not want to see an adult entertainment club next to an elementary school, or a manufacturing plant in the middle of a residential area. Zoning laws group areas of the town or city into specific areas for each type of land use. Zoning laws may change, and a real estate investment that is zoned commercial or residential today may be rezoned for another use in the future.
If you invest in real estate that is rental property, your tenants may cause zoning problems. Tenants who run a business from their home may unknowingly violate zoning laws, so it is very important to have a clause in your lease agreement stating what can and can not be done on your rental premises. Most home based businesses are not a problem, but if the tenant has customers coming to the property, there may be complaints about noise or traffic which can cause problems.
Another way that zoning laws may affect your real estate investment is when zoning is changed from one class to another. If the zoning is changed from residential to another class this can mean a higher property value, which means more value for your investment.. If the class is changed to residential then the property value may drop, causing you to lose money on your investment. Sometimes there is a conditional zoning requirement. One case may be where a residence has existed on a property for years. If the zoning laws change the area from residential to commercial, the city can not force the owner to sell or tear down the residence. But if the home is destroyed in a natural disaster or fire it can not be rebuilt, and only commercial buildings can be built on the land.
It is very important for a real estate investor to know the zoning requirements of any property before they invest. Find out what these laws are and any proposed changes. This can save you a lot of money and aggravation. Make sure that your lease agreement states what activities are allowed and not allowed on the rental premises. Find out what the other properties in the same area as the possible investment are zoned. By being aware of the zoning laws and requirements you will avoid some costly and time consuming mistakes.