I imagine this article title sounds strange, so let me explain. Nonconforming use refers to real estate zoning regulations. It applies to real estate that has a grandfather clause because a new zoning ordinance was passed that it does not conform to. The new clause may only allow single-family homes but before the new zoning, a fourplex and a couple of triplexes already existed within the zone.
New construction can only be single-family houses but owners don’t have to tear down an existing nonconforming structure. Instead, the structure is allowed to continue operating as it did previously.
Zoning regulations vary greatly across the country so this may not even apply to your location. But if it does, you’ll be glad you heard it here.
Because of the real estate bust, there are vacant properties everywhere. Not all of them are single-family homes. There are plenty of tiplexes, fourplexes, and apartment buildings sitting empty.
Some locations have very strict regulations and grandfather clauses. Many allow the nonconforming use only if the property is in continuous use. The grandfather clause can lapse if the property sits vacant for a set amount of time. The length of time varies just as zoning regulations do.
Imagine you decide to invest in a foreclosed fourplex. You negotiate a great deal because it needs repairs. To your mortification, the day after the deal closes you go to the utility company to have the power turned on and they tell you they can only turn on one unit because it’s been vacant for more than a year and is now zoned single-family.
Now that great investment that was suppose to cash flow won’t. You could go to your local zoning office and ask to have the grandfather clause reinstated. Maybe they will or maybe they won’t. More likely they’ll hold a public meeting to see what concerned citizens want. Maybe no one will show up at the meeting. Or maybe a bunch of angry neighbors don’t want it used as a fourplex because it was a drug infested nightmare before.
Here is what you need to know when there is a chance a building you want to buy has a nonconforming grandfather clause:
1. The current zoning for the area.
2. The conditions that cause it to lose any nonconforming grandfather clause.
3. The length of time the building has been vacant .
The first two you learn by calling your local zoning authority. The third you learn by asking how long the utilities have been turned off.
All the Best,

Peter Vekselman

PS: Private Real Estate Investment Coaching Available:
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Amid ongoing concerns about both the national and global economy, the commercial real estate sector continues to make slow but consistent strides in improvements. Yet it has a long way to go with all subsectors except apartments still having double-digit vacancy rates. Retail space continues to lag behind all of the other sectors.
According to CBRE (the worlds largest commercial real estate firm and only commercial real estate firm in the S&P 500) office vacancies stood at 15.7 percent. Obviously, still very high but at the lowest level since 2009. This remains well above the prerecession vacancy rate of 12.4 percent. Helping drive a lower vacancy rate are lease concessions and the fact that new construction remains at record lows. If not for these effects, the continuing poor economy would almost certainly drive more vacancies.
Apartments continue as the bright spot in commercial properties with a national vacancy rate of only 4.8%. Some markets, such as Boston, Pittsburg, San Jose, and Minneapolis have apartment vacancy rates of less than 3.5%. Rent increases are expected to continue in the majority of markets across the country throughout 2012 and into the foreseeable future. New apartment construction is experiencing growth but all indications are that market growth will exceed what is being built.
The retail market remains stalled at a national vacancy average of 13.0 percent. What is unsettling about the retail market is that absorption is approximately equal to the very low rate of new properties coming onto the market. Most markets remain close to where they were a year ago.
Vacancies in the industrial sector remain high but unlike the retail market, this is the eight consecutive quarter of improvement at 13.2 percent. For large metropolitan areas, twice as many reported falling vacancy rates than reported increases for the second quarter of 2012. One encouraging observation is that cities like Indianapolis, Memphis, and Detroit saw significant improve exceeding a full percentage point.

All the Best,

Peter Vekselman

PS: Private Real Estate Investment Coaching Available:
http://coachingbypeter.com/mki/

 
PPS; Watch my You Tube Channel
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I’ve written several times about how foreigners are taking full advantage of the deeply discounted real estate market here in the US. The Brazilians and other South Americans are buying up Florida, the Europeans and others are buying up the Northeast, and the Chinese are buying up the West Coast.
Now, the Chinese are negotiating to take it a step further with a $1.7 billion development project in San Francisco. And this is Chinese government money coming from the China Development Bank and Export-Import Bank of China. They are negotiating with one the largest US developers, Lennar Corporation, to fund up to 20,000 residences, a sports arena, and millions of square feet of office and retail space. The city has committed hundreds of millions in tax incentives to encourage this development on two abandoned naval bases.
The negotiations could still fall apart but have been active for about a year. One sticking point is China has required Chinese workers be part of developments it previously funded in third world projects in Africa, Asia, and South America. That’s not going to fly here in the US.
It’s not clear how it would be involved but the government owned China Railway Construction Corporation is said to be part of the negotiations. In all likeliness, they might be brought in as a consultant or they may be looking at purchasing local construction companies that would be part of the project.
It’s well known that the Chinese are looking for more opportunities in the US market. The redevelopment of these two naval yards is seen as an opportunity to get a foothold in the market and as an opportunity to learn what it takes to do large-scale business in this country. Another motivation for the Chinese is this is a green, environmentally friendly, project and the Chinese want to learn the latest green technology available.
China is actively investing all around the world. Even at $1.7 billion in San Francisco, the deal is small compared to the $20 billion it invested in Venezuela and the $25 billion invested in Russian oil production in recent years.

All the Best,

Peter Vekselman

PS: Private Real Estate Investment Coaching Available:
http://coachingbypeter.com/mki/
PPS; Watch my You Tube Channel
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As measured by the National Association of Home Builders Improving Markets Index (IMI), the residential markets in 35 states are experiencing sustained improvements. It’s not easy making this list. A state only qualifies as sustaining improvement when it shows six months of improvement in construction permit growth, lower unemployment, and increasing home prices.
The Bureau of Labor Statistics provides employment data. Home appreciation data comes from Freddie Mac and new permit data from the U.S. Census Bureau.
As you would expect in this less than stellar economy, the improvements have not been steady or reliable. Each month new states make it onto the list while others fail to maintain a full six months of improvement and drop off the list. However, the good news is there are a significant number of states with five months of improvements. And that is the same number of months the IMI has increased the number of states on the improvement list. Still, with the list at 35 states, it is now expected to plateau for the next several months. Especially now that the spring buying season is behind us.
In addition to the 35 states, at least 80 individual metropolitan areas show sustained growth in the numbers over the past six months. Obviously, I can’t provide the entire list here but the top five improving markets are:
1. Cumberland, MD – WV
2. Fairbanks, AK
3. Wheeling, WV – OH
4. Kokomo, ID
5. Indianapolis, ID
Also worth noting are:
1. Phoenix, AZ
2. Boulder, CO
3. Tampa, FL
4. Detroit, MI
5. Knoxville, TN
The June numbers saw 13 new metro areas added to the list while 48 failed to continue improving. What this data is telling us is that while the residential real estate market continues to improve it certainly is not steady or dependable. It’s lurching and sputtering. This is especially true for those near the bottom of the list. Any small set back in employment, permits, or house values drop it off the list. While this is useful for tracking improvements, it has limited value long term because those at the top will begin falling off the list as they become fully stable and can no longer post improvements to the numbers.

All the Best,

Peter Vekselman

PS: Private Real Estate Investment Coaching Available:
http://coachingbypeter.com/mki/

PPS; Watch my You Tube Channel
http://www.youtube.com/user/InvestmentReal?feature=watch