Conversions

Apartments with new life as condominiums____ Gas stations now operating as retail outlets (Seven-Elevens). . . . Old homes converted to office space. . . . What was once farm acreage is now a sprawling urban shopping center. These properties are examples of adaptive use of both land and buildings brought about by a locale's growth and change.

An oversupply of gas stations throughout the city serves as an example. Because of stiff competition among these service stations, the unprofitable ones shut down and become vacant. A new use becomes imminent.

Conversions provide boundless opportunities for the creative investor. Converting an old house located in the downtown area can be very profitable. Small offices sometimes rent at twice the rental rate of housing. Of course, the opposite also can occur. Recently, in London and New York City, housing prices have climbed so high that investors are converting many types of retail, warehouse, and offices into apartments (rental and for sale).

Several years ago, Wolverine Development in Lansing, Michigan, was involved with investing in strategic corner locations in the path of the city's outward growth. The company would purchase single-family homes on a good corner location, with the long-term intent to convert these homes to a more profitable rental use. This method had a great advantage over investing in similarly located vacant land because the houses would generate rental income until growth made conversion profitable.

Converting land and buildings is like turning straw into gold. But how can you take advantage of these changes in land use? Begin by obtaining an overall zoning map from your city's planning department. Each area of the city has a particular zoning (residential, multi-unit, agricultural, commercial, and industrial) limiting its land use. A good conversion prospect would be a residential home already located within a commercial zone. If the property you wish to convert is located in a residential zone, it would require a change in zoning for you to accomplish your objective. Applying for a variance or zoning change may require money, time, and effort. The easiest properties to convert are those that are adjacent to the zoning classification you wish to convert to. Check with your local planning department and inquire about the necessary procedure. Also, see the book, The Complete Guide to Zoning (McGraw-Hill, 2005).

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