How to Use Options to Control Properties That Can Be Rezoned for More Profitable Uses

•rnn often overlooked, but very profitable, option strategy involves buying options on properties that can be rezoned for more profitable uses. Rezoning is required whenever a property owner wants to use his or her property for a purpose that does not conform to its current zoning classification. The rezoning strategy outlined in this chapter involves buying an 8- to 12-month option for the purpose of controlling a piece of property while awaiting approval to have the property's zoning classification changed to a more profitable use. And once the rezoning request is approved, you can either resell your option or exercise it and buy the property yourself. Rezoning can be very profitable, as converting a property to another use by changing its land use or zoning classification is usually much less expensive than acquiring land and putting up a new building from scratch. Your best bet when using this rezoning strategy is to find a vacant property in an area that is changing from residential to commercial use and where recent rezoning requests have been approved. I refer to these as emerging commercial areas, and the main reason you want to buy options in this type of area is that you are less likely to meet any organized opposition to your rezoning application. As you will learn later in this chapter, organized opposition from anti-rezoning zealots is generally the biggest obstacle that investors face when going through the rezoning approval process. However, I am forewarning you that, in many instances, investors can be their own worst enemy during the rezoning approval process, especially when they fail to grasp the exact mechanics of rezoning procedures in their area and try to cut corners by not going through all of the required steps. The very last thing that you want to do during the rezoning approval process is get on the wrong side of the bureaucrats who make up the staffs of local government planning and zoning agencies by attempting to go around them and bypass their approval of your application. I say this because once you have been identified as someone who does not want to play by the rules, these so-called public servants will make you toe the line and do everything exactly by the book and will cut you absolutely no slack. Plus, the staff members will more than likely recommend to the locally elected officials who have the final say on rezoning applications that your application be denied. And 9 out of 10 times, such a recommendation is enough to get the politicians to say no to your application. My bottom line advice for investors going through the rezoning approval process is to do your homework, leave your ego at home, and adopt an attitude of cooperation.

Beginning investors often ask me why property owners would sell an option on a piece of property that can be rezoned to a more profitable use. They do this because they do not understand that average property owners do not have an entrepreneurial bone in their body. And the idea of rezoning their property probably never even crossed their mind. But even if they did think of it, most property owners do not have the knowledge, money, or desire to apply for rezoning approval themselves. Or, if they did want their property rezoned, most owners are usually intimidated by the rezoning application and approval process, petrified of speaking in public, and worried about what their family and friends will think when their appearance before the zoning commission is broadcast on the local public access television channel.

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