Why Non-Conforming Is a Risky Strategy

They are all over town, the investment properties that seem too good to be true when you run your numbers. This is not always the case, but usually there is a reason for the price. A property can be non-conforming for several reasons of which I explain below.

Size – We normally see this with large additions. You don’t want to be the biggest house on the block, and it is worse if there is a significant size difference to the neighborhood. If you are the biggest house, your house is worth less per sq foot meaning you don’t get the value you would expect from the size.

Appearance – I see this a lot with new construction. There might be a handful of new houses in a neighborhood of houses that were built 30 years ago. This brand new house might be worth $400,000 in a new neighborhood, but because it is surrounded by older homes, it is worth much less. You cannot compare the new house to the new neighborhood ½ a mile away. People will pay less if they are not surrounded by similar homes, and it is very difficult to appraise these, so be careful!

Something else that could fit into non-conforming appearances is under or over improvements. We just funded our first property with an in-the-ground swimming pool. The pool provided almost no value and could potentially provide a negative value. It might cost $25,000 to put that pool in, but other homes don’t have a pool so it is not expected and people don’t pay for it. I believe it might actually decrease the value, because people expect back yards and don’t want the maintenance hassle. Simple things like granite counters compared to laminate are also important. I would look at other houses that are currently listed and try to copy what is on the market or over improve just a little to standout, but do not expect a higher price just because you have the higher quality. I think under improved houses is the obvious one. It is because of these houses people can fix and flip. They get a house at a big discount because it does not fit in the current condition. Once the condition is brought to standard, it can be sold at a higher price.

Use – This is the big one and the reason I thought I should write this article. I own two non-conforming multi units. What makes them non-conforming is that they do not conform to city zoning. In one case I am zoned for single family and a have a duplex, and the other I am zoned for a duplex and have a triplex. I purchased them this way, and in both cases the city is aware of the current use. The reason they work for me is the numbers as rentals are really strong and I make a fair amount of money each month. But there are two problems you need to know if you decide to go the route I did.

1) Management. My guess is that most of these buildings only have one electric and water meter, so if you ask that your tenant pay utilities you will need to find a fair way to divide this. Of course this creates challenges because tenants start complaining that they use less and don’t want to pay as much as their neighbor. Other problems could be one furnace or water heater with one thermostat, mail getting mixed up, and of course problems if you ever need to pull permits for improvements. On my triplex, the US Postal Service will not allow me to have three mailboxes, so I had to work it out with one of the tenants to distribute the mail. On that same triplex, I was denied a permit to build a garage that I planned to rent separately because there are too many structures for the zoning. On my duplex, I was denied the ability to have two access points to the property when the city put in a new sidewalk. My tenants share one access and they are fine with it, but these are things that I learned after I owned them.

2) Exit. The big problem that I see with non-conforming investments and especially non-conforming use is the exit is very difficult. It is challenging to finance these, so it will be difficult to refinance or sell them. If your buyer can’t get financing, they can’t buy. Thus reducing the buyer pool significantly; this obviously reduces the value. These need to be financed with cash, private money, or banks and cannot be financed FHA, VA or conventional. Unlike conforming properties, you need to account for your potential buyer pool when you analyze the re-sale value.

Non-conforming buildings can be very profitable and I am very satisfied with mine, but there is some real risk. When you do your diligence you might want to check with the city about what they will require, as well as make adjustments to the value to justify the fact that the financing is difficult. You don’t want to be surprised that it is worth a lot less than the other homes after you own it. Also, if you don’t have cash or non-traditional loans, you will not be able to buy, so don’t risk your earnest money until you know you can close.

Make a Fortune With Real Estate

Property consisting of land and the buildings, as well as with its natural resources such as minerals or water, crops, immovable assets of this nature and buildings or housing in general. The business of Real Estate is the profession of buying, selling, buildings or housing and renting land. Before going ahead, some important factors about estate should be kept in mind to do your job well.

Types of Real Estate

• Residential:

Containing either a single family or joint family, that is available for non-business purposes. There may be different types of housing tenure also, and the size of an apartment or house can be described in meters or square feet. But the area of “living space,” excluding the garage and other non-living spaces may differ in some countries.

• Real Estate Investment

This Investment is the thing that generates income or is otherwise intended for investment purposes. Investors own multiple pieces of real estate, which serves as a primary residence.

• Commercial:

It is a property that is used the design for business solely. For instance, commercial estate includes restaurants, offices, parks, malls, gas stations and convenience stores

• Industrial:

The property that is used for industrial work. But it covers a vast range of business types and comes in all shapes and sizes.

Industrial Real Estate includes single or double-storey buildings. Small industries have flexible interior space. Large industries include medium to large warehouses and factories that are designed to store goods or manufacture.

To become.

Fortunate Real estate agents, need to be familiar with their locality, reasons to increase or decrease property prices. For instance, if a new airport or road is to be built this can increase the price of nearby houses. Equally, improvement of an area can enhance prices. The agent must be aware of recent sale prices or rental for comparable properties of the area.

To become estate agents or professionals, dealing with all residential, agricultural and commercial property. They should adhere to a code of conduct, which includes regulations about looking after their clients’ money.

Slightly Surreal: Strange Trends in Real Estate

For most people, the word “house” conjures certain images found in childhood drawings. If you have a building with mostly right angles, a single front door, a few chest-high windows, and a chimney, you’ve probably got a prototypical home. However, real estate is a changing field, and people are seeking unique housing options that don’t quite fit inside the box.

Tiny Houses

By all definitions, tiny houses possess most of the features of their more spacious counterparts, just in a much more condensed way. A favorite in both rural and urban areas, tiny houses are as much a choice in dwelling as a statement of one’s principles. While there is no presently agreed-upon size restriction before a domicile is no longer “tiny,” 500 square meters is an accepted point in some circles. Got a few too many boxes of t-shirts weighing you down? Tired of walking such great lengths to get to the light-switch before bed? Trying to keep your real estate tax down to a minimum? A tiny house might be for you.

Passive Houses

Not entirely in another world from tiny houses, passive houses are for those trying to reduce their environmental impact. Less a set of aesthetic rules and more an internal set of standards to maximize energy efficiency, this enterprising style is making considerable in-roads in the real estate market. Originating in Germany in the late 1980s, the style has slowly found a niche amongst people with a penchant for all things “green.”

Staples of these energy-efficient dwellings are superinsulation, airtightness, advanced window technology, solar techniques, and many others. Passive houses incorporate the entire system of real estate, so even the landscaping is efficient. For example, trees that shade parts of the dwelling appropriately and wind-reducing hedges can be a part of the design.

Treehouses

Perhaps living in trees will never constitute a substantial amount of the real estate world, but there is no question that they are gaining popularity. From increasing prevalence as an airbnb destination to a full-time paradise for more intrepid souls, life in a treehouse offers a lot of simple perks, as well as some drawbacks. Clearly for the more adventurous, many treehouses are entirely off the grid, and many of them are not quite up to code. Even a cursory internet search will reveal numerous forums on the subject of whether or not certain dwellings are legally allowed to be inhabited. Treehouse owners have to contend with being mindful of protected trees, wildlife protection acts, and other tight restrictions. If all of the criteria are met, however, the resulting home is something of a nature-lover’s paradise.

These alternative designs and ideas scratch the surface of present trends in housing. While they aren’t likely to replace conventional homes any time soon, they might be an indication of where things are headed.

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