Non-Conforming Real Estate: Why You Should Conform
Real estate investors know the dangers of investing in a property that does not conform to the area; exiting the deal becomes very difficult .What is Non-Conforming Real Estate? In real estate there are several reasons a property would be considered non-conforming:1) Non-conforming use – most local governments enact zoning laws/ordinances that regulate the use of property. As zoning requirements change, pre-existing structures are often grandfathered in. For example: if an area was zoned residential, the corner gas station would become a nonconforming use site because it does not fit the classification of property in the zone.2) Appearance – the appearance of a property can also make it non-conforming. They are the houses that stand out like a sore thumb; the ones that make you scratch your head and ask “how did that get there”.3) Size matters – in a neighborhood full of 3 bedroom/2 bathroom ranches, that 6 bedroom/2.5 bedroom McMansion would be considered non-conforming. Finding effective comps to determine ARV is difficult if not impossible.4) Over/Under – The improvement level of a property is a key consideration for rehabbers. If you choose Italian marble floors in an area dominated by ceramic tile, you have over-improved the property, making it non-conforming. The same can happen in an area made up primarily of custom kitchens and exotic countertops if you install standard cabinets and laminate countertops.
If conformance is important to ensuring the widest appeal to buyers, how do you make sure potential buyers choose your property over others in the area that are, by definition, identical or very similar? 6 Keys to Massive Appeal Start marketing during rehab: We used to wait until our renovations were finished to market it, we didn’t even put a sign in the yard. We will never wait again. On our most recent rehab we put signs out in the yard immediately after demo and had people stopping by frequently. In fact, the eventual buyers visited the property during the first full week of work. They came back to check on the process often and loved seeing the transformation. There were very comfortable being able to see the property as it progressed and knew we were not simply making cosmetic improvements, we were actually adding value.Make buyers feel better: There is nothing buyers like more than knowing the electrical, HVAC, and plumbing are in good repair, so take care of these issues right away and make sure you market the property to highlight that advantage. This will go a long way in developing your reputation as a rehabber, especially in an age where many people are out to cover up as much as possible to make an extra buck.Choose wisely: Know what buyers in your market value the most. In general, kitchens and bathrooms bring the highest return on investment, but each market is a little bit different. Understand what buyers are looking for, what they are willing to pay extra for and what they could care less about.