The Three Ways that Property Developers Can Take Advantage of Rezoning
Do you want to get the most out of your project and make a healthy return on investment? Rezoning can be the key to accomplishing that.
As you know, there are different development rules and financial regulations that govern land zoning. And as a property developer, understanding these zones helps you determine the best matches for your project capabilities.
It’s worth mentioning that when there is a drastic change in population or environmental concerns, local councils can rezone the land to address these changes.
However, the local council isn’t the only body that can file for rezoning. Property developers like you can also apply for a plot of land to be rezoned if you’re confident that it will increase your return on investment.
Imagine you find a land lot that fits your needs perfectly but it’s in the wrong zone. The zoning doesn’t have to stop you from taking on the project. Through a rezone, you can attempt to change the permissible uses to fit the project’s requirements.
However, zoning amendments don’t happen overnight. There is a formal process that you still need to go through.
A rezoning application could be viable if there’s no other way to reasonably develop or use the land under the current zoning or if land development would negatively impact the public.
In short, this process changes the land’s permissible usage, development controls, and eligible loan types. And in some cases, it could also impact land value.
But to be approved for rezoning, it’s essential to understand how the whole process works so you can plan accordingly.
That’s precisely what this article will explain.
How Do You Get a Property Rezoned?
You may want to approach every rezoning project from the very basics. It’s important to fully understand the whole rezoning process, which can be a lengthy and costly endeavour.
To help you increase your chances, take a look at the following six steps.
Step #1 – Get the Research In
Go to your local council’s website and look for the zoning rules or ordinances. Does your property plan comply with zoning laws?
Look up the local zoning classification and figure out what suits your needs.
Step #2 – Stop by Your Local Council
As you know, your council’s zoning commission is in charge of rezoning. This means that your local council will have all the necessary documentation to get you started.
The documents may include property maps, surveys, and traffic studies. Maps, in particular, will show colour-coded zones and you can also ask for the strategic plan containing the local council’s projections for the next five to 10 years. The information contained within can make your application a lot more straightforward.
For example, you may find a rural zone marked “future urban”, and if that’s what you have in mind, you can move forward knowing that you and the council are on the same page.
Once that’s done, gather all relevant documents and always double-check before you submit your DA, or development application.
This is why it makes sense to look for information at your local council.
Step #3 – Reach Out to the Neighbours
How’s the neighbourhood around your target property?
Check out the area as soon as possible and discuss your plan with the neighbours. Any opposition can be a major red flag because local resident complaints can be a valid reason for the council to reject your DA.
It’s the reason why you should resolve potential issues proactively. And this is best accomplished if you’re aware of your project’s impact on its immediate environment.
Step #4 – Calculate the Costs
Land rezoning can be an expensive affair. For this reason, you may want to estimate the development cost, pre-lodgement consultation fees, and any other costs beforehand.
Only after you’ve made sure that the costs won’t significantly affect your project’s profitability can you move forward with confidence.
Step #5 – Collaborate with Professionals
Even if you have years of experience as a property developer under your belt, this is not a project that you can approach on your own. A town planner can assess your proposal and advise you as to whether it’s likely to receive the council’s blessing or not.
You may also need to consult someone with a political background, as zoning can be intimately related to it.
Above all else, consider adding a real estate lawyer to your team. That’s a professional who can make sure that your DA meets all requirements.
Step #6 – Wait for the Planning Commission
After you submit your application, your state’s planning commission will take over. There will be a legislative meeting and you’ll want to make your case and respond to any questions from the board members or the public. After everyone has made their statement, the DA will go to a vote.
Keep in mind that even a simple DA can take a couple of months, and the more complicated ones will often take much longer.
Now that you’re aware of the steps involved, let’s have a look at some of the most lucrative projects that require rezoning.
How Can You Make Rezoning Work for You?
There are numerous ways to make rezoning work for you. Here are three of the most promising.
A subdivision can be a relatively easy way to turn a profit, as long as you’re up to speed on rezoning and filing DAs.
The main considerations relate to the size of the subdivided lot, access to roads and services, and allotment contours for dwelling feasibility.
To pursue a subdivision, you first identify a lot of the right size for additional occupancy (up to 1,000sqm). You can then plan to subdivide it into as many as three lots that you can sell separately.
It’s worth mentioning that the most suitable land for a subdivision is corner lots that have road access on both sides. This attribute is equally attractive to businesses and residential property investors.
Rezoning from Rural to Residential
Rural zoning always comes with restrictions regarding the permitted size of the lot. The exact number may differ from one area to another, but the minimum is 4,000sqm or one acre.
That said, after purchasing a rural lot, you can file a DA to subdivide it into smaller lots for selling individually.
For example, when you spend $400,000 for a 20-acre rural site, you’ll lose 15% of the area to roads and services. This will leave you with 17 acres, which you can then subdivide into 17 allotments of one acre each that may be worth up to $100,000.
Rezoning that lot to higher density residential, such as four or five lots per acre, may allow you to slice it up to 85 lots for $60,000 each. This works because people are more willing and able to pay for smaller lots that are more manageable than unserviced chunks of land.
You can also up-zone rural land to commercial.
In that case, the land should ideally be accessible to passers-by, possess a good population density, and have adjoining uses, such as a cluster of fast-food restaurants, just so long as it’s not too close to commercial competition.
Rezoning Several Units Under a Single Title
If the current zoning of your target property only allows two-storey blocks, you can potentially increase that number to six after a rezone.
In fact, it’s not uncommon for the property value to double if you can pull this off.
For example, a developer in Penrith, NSW, saw their land value increase from $600,000 to $1 million overnight upon rezoning approval.
In Sydney, a 1,000sqm block of land that got rezoned from industrial to multi-occupancy residential worked out pretty well for the developer. The eight-storey apartment building erected after the rezoning sold for $10.7 million – an exhilarating jump from the $2 million invested initially.
Make Rezoning Work for You
However, albeit complicated and costly, rezoning can be a valid method to increase your return on investment and property value.
But before you attempt this, you’ll want to arm yourself with patience and all necessary documentation so as to maximise your chances. It could take a while but it can also be well worth it.
With the right subdivision strategy, which often must be accompanied by a rezoning, you can potentially double your profit.
Rezoning requires a lot of research and planning, but none of that matters if you haven’t found feasible sites. Luckily, this is something that Archistar can help with. In just one click, you can get a due diligence report that gives you all the information you need about the site, including planning controls, zoning, potential value of a site and sales history. You’ll instantly know whether a site is worth pursuing.
If you’d like to see Archistar in action, schedule a demonstration by clicking here.