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A healthy investment portfolio may include commercial real estate, but if you are new to this type of investment, you may not know how to start when it comes to negotiating.
Zoning laws play an important role in the value and usage of potential investment properties. These laws dictate what types of commerce are allowed in a neighborhood and how those businesses can interact with other buildings or residences.
Understanding New York Zoning Districts
New York State designates three main types of zoning districts — residence (R), manufacturing (M), and commercial (C). These three zones are subdivided to allow for a wider range of usage.
For example, having skyscrapers and detached single-family homes existing side by side would be impractical and unsafe. For this reason, residence districts are divided from 1-10. Single-family homes are found in RI districts, and residential skyscrapers can be built in R10 districts.
Manufacturing districts include a range of commercial and industrial buildings and activities. Light manufacturing is approved for M1 districts, while heavier industry is limited to M3 districts.
Commercial districts are divided into eight categories. C1 districts contain typical neighborhood retail stores and services. You’ll find businesses such as gas stations and car repair in C8 districts.
There are also special purpose districts and special zoning rules to consider.
The Relationship Between Zoning and Property Value
The zone a commercial property is built in significantly impacts that property’s value. Zoning determines what kinds of businesses can be conducted on the property. High-demand districts — those sectors that allow a wider variety of high-income businesses — are more desirable and, therefore, more costly.
Property in restrictive zones with limited use costs less. You can use your knowledge of property zones to assess fair market value and negotiate a buying price. However, keep in mind that sellers will do the same.
To make things more complicated, zoning can change. A seller with property in a residential zone may be aware that the area will soon be approved for commercial use, potentially increasing its value thanks to broader usability.
This can still be a good opportunity for a buyer. Purchasing a property in a commercial property due for a zone upgrade means almost instant equity.
On the other hand, rezoning can devalue your property. A developer may purchase property with a plan to build a structure currently permitted under existing zoning, but re-zoning prohibits that construction.
Navigating Zoning Complexities
Clarity on zoning laws is one of the best negotiation tools a buyer can have, but not every person interested in commercial real estate investment has extensive knowledge of these regulations and how to use them to their best advantage.
The process of ensuring all proposed business plans comply with existing laws is time-consuming. Plans to change operations or expand current operations can also be threatened when zoning laws change or if existing zoning provisions are not carefully considered.
For those interested in investing in commercial properties but not fluent in New York zoning laws, consultation with an experienced real estate attorney can save money, time, and frustration.
A Real Estate Attorney Can Help
If you’re considering purchasing commercial property in Staten Island, let Merlino & Gonzalez real estate attorneys help you negotiate the best possible price. The complexities of New York zoning laws are ever-changing and hard to keep up with. It takes experience to stay on top of current zoning regulations.
The real estate attorneys at Merlino & Gonzalez in Staten Island, NY, are here to answer your questions and help you get the property you want at a fair price.