new purchase - town says it's zoned b-2 and can't be rented as residential

hey gang,

interesting scenario here. we picked up a property that is on a highway and zoned LOCAL BUSINESS (B-2) ZONING DISTRICT. it’s on an acre of land and has a single family home on it that has been built in the early 1900s. this home was lived in by family members and then rented out the past 7 years and possibly longer.

we just finished painting the place and are in the process of putting in a new septic system. we have a “for rent” sign outside the house and the zoning officer called my office. he left a voicemail saying that the “i buy houses signs” are illegal (there are 2 of them by the mailbox staked in the ground, on the property), and that the house says “for rent” but it’s zoned business and cannot be rented out for residential purposes.

anyone have any feedback, suggestions, similar situations? it seems odd that a SF house is on the premises but can’t be rented out.

thanks in advance.

The previous owner’s situation was evidently grandfathered in.

I would sell the house on a land contract to a business operator, asking 10% down, 8% interest, 30-years, all due and payable in 10, and no formal qualifying. Of course, the price would be at least 10% over retail.

I would be offering a terms bargain they couldn’t get from any bank. You wouldn’t need to offer T.I. to get a tenant, and 'you’re not acting as a landlord in the transaction. You just collect your loan payments, and wait for your big pay off in a few years.

Or maybe it’s time to tear down the old house, and start from scratch.

that changes things. this was supposed to be a long term rental for building wealth. i believe the zoning states it’s mixed use though. does that change anything?

interesting. the neighboring town has it as “mixed use” but this one has it as business service district.

Usually properties like this are grandfathered in. You need to personally check into this by talking to someone that know what is going on down at the zoning office.

But, even if it is grandfathered, that is NOT where your money lies. You need to seriously look into conversion. Commercial properties are much more valuable than an old residential. First, find out if the property can be split. You could very well make your purchase price back just by selling any “extra” lot splits. Put the house on the smallest lot and rent it out as a commercial property that will fit within the current zoning. Converted houses work good as boutiques, real estate and attorney offices and even medical.

That is how you make the money off your investment.