Different Types of Real Estate Zoning: One of the key drivers for Expert Real Estate Investors is to investigate how the property is zoned. Is it an R1? Is it an Industrial Property? Is it a Commercial Property? There are many factors that dictate whether the zoning can change and whether the County will allow the zoning to be adjusted depending on the area of the property.
Residential Zoning | Real Estate Zone
Residential Zoning is built for single-family homes, townhouses, apartment buildings, multi-family houses, etc. Depending on the jurisdiction, you may see codes such as “R1”, “R4”, etc. R1 typically means that per acre, you are only allowed to build one property. R4 means that per acre, you are allowed to build up to four properties per acre on that lot.
The more common types of zoning for Residential properties are for townhouses. They’ll typically be R32 or a very large number. Homebuilders see a much bigger profit scheme when building townhouses in comparison to single-family homes simply because of the number of units that can be built after the land is purchased and rezoned.
Commercial Zoning | Types of Real Estate Zoning
Commercial Zoning is used for offices of large companies and small businesses. Commercial Zoning can also be used for other types of businesses as well other than just a workplace. Doctors used Commercial graded buildings as their medical clinics. Hospitals are zoned Commercial. Restaurants are zoned commercially. Anytime you stop by a Wal-Mart, Costco, CVS, Walgreens, or Dollar Tree, those are all Commercial buildings.
At a shopping mall, the main attraction is usually known as “the anchor”. Large stores such as Target, JCPenney, or Best Buy are usually the customer magnets that bring in a lot of traffic and automatically the other smaller stores are noticeable and receive free marketing just by being next to the anchor.
If you have a multifamily unit with 5 or more units, it is considered commercial property. If you have a multifamily property with 4 units or fewer, you can classify that as residential. It can even be financed by an FHA loan.
The newest trend is mixed-use. Mixed-use is defined as zoning that blends multiple uses such as integrating commercial and residential. This is a new trend since commercial-graded properties, specifically, offices, are used a lot less frequently in city areas thanks to covid. Converting commercial graded to mixed-use allows you to bring in more revenues with tenants in the residential units and makes it more appealing to commercial tenants with more potential customers. By converting Residential buildings to mixed-use it develops higher traffic and lead generation for their tenants.
Mixed-use has continued to be a new surge ever since covid and more investors are developing into this phase. Instead of seeing just commercial shopping or just apartments, you see a lot more buildings with a combo of the two.
Industrial and Other Zoning
Industrial zoning is used mainly for Factories. Imagine you have a large manufacturing plant that’s creating products such as oil products. The zoning must be approved as such by the state and county for this to work.
There are other types of zoning such as M-1. This is known as light manufacturing. Let’s say you want to start a truck parking business. Depending on the county and the state, they may require you to have the land designated as M-1 for this to work. A lot of businesses purchase land and lease it to generate revenue. This is known as a Raw Lease.
There’s also Agricultural zoning. This is the type of zoning that’s meant to protect farmland in the long run or preserve land and our forests. Over the years, a lot of larger corporations have of course taken apart mother earth and have structured buildings left and right. This is also known as Agricultural protection zoning.
If you have a property that’s zoned residential and needs to be reassigned as commercial, depending on the circumstances, the county may change the zoning if you have a specific purpose, the property project plan, and it can properly go through the appropriate departments such as a Department of Transportation. A great example is converting a single-family house on 1 acre to a mixed-use apartment building plus commercial property. Around the surrounding areas of this property, you have other commercial properties and apartment buildings. With the proper due diligence, surveys, and inspections, the county and DOT (Department of Transportation) may just approve it.
Overall, when you have zoning rules and regulations, you always must keep in mind that it’s set by the county and general jurisdiction to keep fair order for the areas. Whether you’re in a city, suburban area, or rural area, Zoning helps maintain your general covenants.