Changing The Use Of Investment Properties

There is a big difference between investing in the rejuvenation of real estate projects and investing in stocks, bonds and other securities. When you invest in securities, you have no control of any factors that can enhance the value. In real estate, you have control of the investment yourself.

In an investment in converting use of buildings in real estate, the investor can use creative imagination to change a property into something that has a much greater value, and even better than before.

But, real estate investments that involve changing the use of property are not for the faint of heart. They are riskier than other investments such as buying an established office building, a hotel or a strip shopping center. There are always unknown factors, more things that can go wrong, and fewer things that you can count on. Success is based more on the future than on the present, and the future must be predicted, partly with respect to the income that the property will be able to earn once the use is changed.

Remember the highest returns go to those who take the highest risks.

A More Profitable Use

Most buildings can be changed so that they can be used for a different purpose other than the one for which they were originally intended. Therefore, the large supply of existing properties, many of them very solidly built, may be converted to a better and more profitable use. Older buildings were demolished in the past, but now more thought is given to recycling and preserving them.

The most common examples are the conversion of farmland to commercial or residential property. In most areas, large houses have been changed into multifamily apartments or condominiums. Investors have converted many former manufacturing spaces and warehouses into shopping and office complexes.

Maybe A Change In Zoning

Expect cooperation from city government. Property that has been declining in condition has also declined in value but can be recycled back to productive use. Immediately the building will be upgraded on the tax rolls to a higher value than before. The city or county now will receive larger tax revenue from the property. A change in zoning is often required for a use-change, but it is regularly granted with little difficulty if the investor has a well thought-out plan, that has the community’s needs in mind.

If the conversion is changing apartments to condominiums there may be no zoning change required. Anytime you can avoid asking the city or county for changes in zoning, time can be saved. Another example of continuing with the same zoning is the upgrading of a shopping strip center or mall through physical remodeling and securing different tenants.

Look For Unusual Use-Changes

Manufacturing or warehouse space has been particularly popular for conversion to residential use in many cities. They have big, open spaces that can be partitioned easily into smaller units; the high ceilings provide an atmosphere that appeals to many people; and the locations are often perfect.

This type of building can often be less expensive and easier to rehabilitate and convert than to fix-up a very run-down apartment building. They are usually just empty shells so it is easy to design the interior according to what your research shows the market wants. Little, if anything, has to be removed.

Apartment occupants or condominium owners respond favorably to the idea of living in former warehouses, shoe-manufacturing buildings, and even in abandoned schools.

An example of a truly unusual conversion was in a western city. Garage facilities that formerly housed and serviced the city’s fleet of trolley cars were converted to a highly successful shopping and entertainment center, which was named Trolley Square. The owners later added new buildings nearby, adding to the economy of the entire area.

In Chicago, the Century movie theater was one of the most ornate structures of the era of elaborate movie houses. The surrounding neighborhood began to decline. The transformation of the neighborhood began when investors bought and refurbished aging apartments nearby attracting a more affluent residential population. The theater was then purchased and transformed into a seven-level shopping center with 100 retail shops. The complex terra-cotta exterior of the theater was preserved, but the interior was completely gutted and rebuilt.

By cautiously evaluating, then changing the use and remodeling the underutilized property, you can share in the sizable profits of property-use-change investments.