One parcel, half zoning residential, half zoning commercial

[Mark K]

What's that sound crickets make?...

Its the sound they make when they don't want to get into a JGrant-like 20 page running conversation that goes nowhere because someone is unable to understand something.

But if you really want to know, I can't make it any simpler or more than difficult than this:

You do the HBU analysis in two parts.

You analyze one part and then the other.

That's all there is to it.

If you need more than that, open a text book.

 

[alebrewer]

Its the sound they make when they don't want to get into a JGrant-like 20 page running conversation that goes nowhere because someone is unable to understand something.

But if you really want to know, I can't make it any simpler or more than difficult than this:

You do the HBU analysis in two parts.

You analyze one part and then the other.

That's all there is to it.

If you need more than that, open a text book.

That should REALLY help the OP. In fact - I don't know why that isn't already in a text book... Steps for a meaningful H&BU Analysis on a single lot with two separate zonings: (1) analyze one part and then the other, (2) that's all there is to it. Priceless.

 

[gregb]

Zoning - If a parcel has two zoning districts,

West portion of the parcel is zoned commercial. East portion is zoned office district. Developer wants to build (1 building) across zones. He is proposing to use the west portion for a use that is allowed in commercial zone and east portion for a use allowed in office district. Would you let...

www.cyburbia.org

 

[alebrewer]

Zoning - If a parcel has two zoning districts,

West portion of the parcel is zoned commercial. East portion is zoned office district. Developer wants to build (1 building) across zones. He is proposing to use the west portion for a use that is allowed in commercial zone and east portion for a use allowed in office district. Would you let...

www.cyburbia.org

seems like the general consensus of that post is to get the parcel rezoned, as opposed to performing two separate H&BU analyses? Of course - as has been pointed out herein several times already, I probably find all this too baffling.

 

[Stone]

Its the sound they make when they don't want to get into a JGrant-like 20 page running conversation that goes nowhere because someone is unable to understand something.

Pretty much. Once someone demonstrates the conversation is going to continue to go on and on like that, there's little point in spending time on it.

 

[alebrewer]

Zoning - If a parcel has two zoning districts,

West portion of the parcel is zoned commercial. East portion is zoned office district. Developer wants to build (1 building) across zones. He is proposing to use the west portion for a use that is allowed in commercial zone and east portion for a use allowed in office district. Would you let...

www.cyburbia.org

I guess urban planners aren't as smart as (some) appraisers, huh?

 

[George Hatch]

Maybe you could enlighten the OP, then. How would you perform a H&BU analysis on one, unsubdivisable site with two separate zonings - not overlays. It seems you guys are WAY out of my league.

Two separate zonings doesn't mean 2 separate properties.

Analyzing for the contributory value of each of the components can be pretty straightforward if you have data for each.

So let's say there are 2 residential units + 2 storefronts equaling 3000sf between them. The typical buyer would be buying the property for the income and the financing would (probably) be under non-residential terms. On an income basis an appraiser could develop a price/rm or price/unit value for the residential component by analyzing 5+ units (due to their non-res classification) in a comparable size range, and analyzed for the multi-unit residential components the same way - by looking for multi-tenant residential in that overall size range.

You could even blend the cap rate you're using based on the contributory of each component to the net income. In the example above, if the if the residential use contributed 65% of the net and the commercial only added 35% of the net and these components had different cap rates you could built the blended net that way.

.65 x .0500 = .0325. (for the residential component)
.35 x .0750 = .0263 (for the multi-retail component)
Overall Rate .0588 / NOI = Value by Income

That's not the only way to do it nor is it necessarily even the way investors in that market are operating - it always depends and we always have to look. But it's one way. You can do similar with the value indicators in a Sales Comparison

$30,000/rm x 6 rentable rooms = $180,000 (for the residential component)
$200/sf x 1500sf = $300,000 (for the commerical component
Value by Sales = $480,000

Again, it would be better if you had a good selection of 2res+2ret sales comps to use as direct comparables and just do a price/sf, but IRL these are non-res propertes; not SFRs. So we never get datasets like that. Hence the utility of sometimes switching over to an alternate methodology.

We always have to work with what we have, as opposed to what we wish we had.

 

[George Hatch]

That should REALLY help the OP. In fact - I don't know why that isn't already in a text book... Steps for a meaningful H&BU Analysis on a single lot with two separate zonings: (1) analyze one part and then the other, (2) that's all there is to it. Priceless.

HBU = Who's going to buy it (aka typical buyer) and what are they going to do with it?

 

[George Hatch]

I guess urban planners aren't as smart as (some) appraisers, huh?

Urban planners work for govt and are in a position to make decisions. Our role as appraisers doesn't involve making such decisions.

 

[alebrewer]

Two separate zonings doesn't mean 2 separate properties.

Analyzing for the contributory value of each of the components can be pretty straightforward if you have data for each.

So let's say there are 2 residential units + 2 storefronts equaling 3000sf between them. The typical buyer would be buying the property for the income and the financing would (probably) be under non-residential terms. On an income basis an appraiser could develop a price/rm or price/unit value for the residential component by analyzing 5+ units (due to their non-res classification) in a comparable size range, and analyzed for the multi-unit residential components the same way - by looking for multi-tenant residential in that overall size range.

You could even blend the cap rate you're using based on the contributory of each component to the net income. In the example above, if the if the residential use contributed 65% of the net and the commercial only added 35% of the net and these components had different cap rates you could built the blended net that way.

.65 x .0500 = .0325. (for the residential component)
.35 x .0750 = .0263 (for the multi-retail component)
Overall Rate .0588 / NOI = Value by Income

That's not the only way to do it nor is it necessarily even the way investors in that market are operating - it always depends and we always have to look. But it's one way. You can do similar with the value indicators in a Sales Comparison

$30,000/rm x 6 rentable rooms = $180,000 (for the residential component)
$200/sf x 1500sf = $300,000 (for the commerical component
Value by Sales = $480,000

Again, it would be better if you had a good selection of 2res+2ret sales comps to use as direct comparables and just do a price/sf, but IRL these are non-res propertes; not SFRs. So we never get datasets like that. Hence the utility of sometimes switching over to an alternate methodology.

We always have to work with what we have, as opposed to what we wish we had.

At least a thoughtful post and attempt to help the OP - thank you. Question, though. The Commercial property (2 storefronts) cannot be located on the residential portion of the zoning, correct? Seems like the most challenging piece would be the site analysis. Unless, of course, you have vacant site sales with similar zoning isuses.