Investors make profits by investing and changing the zoning of a particular piece of land then selling to builders and developers.
"Zoning" is the term used by the council to determine what a particular piece of land can be used for.
Rezoning is the process of converting the use of a particular piece of land, for example, changing from a single-dwelling residential property to a multiple dwelling residential.
Keys to make it work:
- Preparation of the proposal
- Equipped with team of local experts
- Knowing where the proposal stands in the town plan
- Cost analysis
This strategy often operates via an option contract holding that particular piece of land chosen while work through the council proposal processes. There will be option fees, cost of council application and fees for using specialists and professional consultations.
Time frame and exit strategies:
The time frame to create growth could take a few months to a year depending on the council response timeframe and market conditions for selling. Once the approval is granted, investors could either sell the land (with or without build plans) or develop on it.
The return perspective:
Using this strategy effectively could earn investors tens and hundreds of thousands of dollars within relatively short period of time.
This strategy could create a huge profit (doubling or tripling the value of the deal) with little effort and minimum investment for smart investors who put the deal up right.
The potential risks/difficulties:
Rezoning often means the investor needs to deal with all the issues of that particular piece of land, such as: soils quality, vegetation, existing owner barriers etc.
Surprises and unexpected risks may occur, making it not the strategy for the beginning investor with a low risk appetite.
Negotiation and communication skills are crucial to the outcome of the deal. Option contracts on the land (often with property on it) needs to be negotiated, and the council officers need to be convinced why the application should be approved etc. Also, creating the right team for the strategy is difficult even for the experienced investor.