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By Matt Gerchow

The author has permitted the reprinting and redistribution of this article.


Change of Use


Change-of-use is a term that is referred to in a sense of zoning as well as a term used in construction plan review by code enforcement.


A change-of-use in terms of zoning does not automatically mean that there has been a physical change to the structure, such as a church being able to house a daycare facility. A little creativity and knowledge of existing codes can increase the value of a property that will attract tenants and prospective purchasers to your project.


A great example of change-of-use in recent years is the wave of construction and condo-conversions that has swept across our country and is now beginning in other countries as well. Where a piece of land was once three retail stores, with use change it might grow to a thirty-story building, housing several hundred units.


My first deal was two houses in one of the worst areas of Miami, Liberty City. During the great real estate run up of 2000-2005 it improved slightly, but I am sure it has probably slid backwards now. The houses sat on one lot and the zoning was duplex. There was ample room between the houses and it appeared from initial research that we could split the properties. We closed on the houses due to some unnecessary pressure from the seller who claimed he had another buyer at full price and did not have time for us to get a definitive answer from the city. Basically he lied and said it would be no problem to get the properties split probably knowing full well that they could not be.


It turns out the houses could not be split and it would have to be sold as a duplex. Not only that, we were nailed for not pulling permits then robbed by another individual that forged the approval of the permit documents. It really sucks being the new kid on the playground sometimes. End of day it was a $38k loss but hey, that’s the cost of a college education.


Change-of-use issues are not always a clear-cut issue and should be treated with care. Make sure to check the probability of use-change with your local planning and zoning office before making your purchase. Do not let anyone pressure you into a closing. They will not be there for you after the closing.


In another article I mentioned Paul Regan, who has sat in the driver’s seat on over 600 transactions including his latest condo conversion project of 130 units in Tallahassee, the Mystic Woods Condos.


I know, I know, condo conversions are dead. Don’t stop reading because you think condo conversions are a huge mistake in this market. Is it possible that low-income conversions might still work, even in this market


Retail Value (ea) 90k
Less Purchase 29k
Less Rehab 15k
Less Sales Cost 5k
Total profitunit 41k


Multiply that $41k by 130 units and you have a nice profit of $5,330,000 for two years worth of work. I know that’s a whole two years worth of work and we are here to learn about making money in quick turn real estate.


This is an example of change of use at its best. Turning a run down apartment building into huge profit center.


If you would like to take advantage of the market and learn how to invest in real estate and you are local to the Dallas Fort Worth area, I know a really great teacher and mentor here in Arlington Texas. Please take a look at his web site:, Dennis has a great Mentoring and training program, I know because I am one of his former students. I learned a lot from his one on one teaching technique. – Michael Harman 817-457-7572

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