Can You Build A House On Commercial Land? | askBAMLand

If you want to build a house on commercial land, you need to be aware of the zoning laws in your area before you commit to the development.

Yes, you can build a house on commercial land, but the parcel needs to be re-zoned for residential land use before you can commence building. To build a house on commercial land, you must research zoning laws, inspect the property, create a project budget, apply for re-zoning, and hire contractors.

After extensively researching urban planning and zoning laws, I have gathered enough information to determine if you can build a house on commercial land. My research has indicated that you need to confirm the zoning laws of your local area before you start building, as they can vary depending on the state and municipality that you live in.

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What is Commercial Land?

Commercial land is any property that has been designated for generating income. Land parcels with this classification are zoned for commercial use and are generally reserved for businesses and generating profit.

The main reason that commercial properties are zoned in this way is to create structure for urban planning. Most people that live in cities prefer to live in areas zoned for residential use - whereas business owners will establish themselves in areas zoned for commercial use.

Commercial land is why we have organized city centers and business districts. Some of the most common uses for commercial land include:

  • Retail businesses
  • Wholesale businesses
  • Clinics
  • Offices
  • Financial institutions
  • Parking lots
  • Malls
  • Hotels

Can You Build a House on Commercial Land?

The honest answer is it depends. There is a reason that you do not see residential houses in the middle of business districts; they are not zoned for this.

With that said, it is possible to build a house on commercial land if you are able to get the parcel re-zoned for residential use. The process for doing this can vary depending on the state and municipality that you live in, given that each area establishes its own zoning laws.

Building a house on commercial land is not very straightforward, and there is no guarantee that you will be given permission to pursue your development. However, plenty of contractors and investors successfully convert commercial land for residential use, as doing so can be a lucrative business opportunity.

How to Build a House on Commercial Land

If you want to build a house on commercial land, you need to understand that there will be some initial red tape blocking your development. This does not mean that pursuing a residential development on commercial land is impossible, but you will need to go through the legal process of changing the property's zoning classification.

Given that each municipality has different zoning restrictions, converting the property is not always easy. In addition, you need to evaluate the specs of the property and consider your planning before you begin any kind of development.

Commercial real estate is not always ideal for building a house, which is why I recommend that you keep your options open so that you are not locked into a specific parcel. With that said, these are the steps that you need to take to build a house on commercial land.

1. Research Zoning Laws

The biggest obstacle that I run into when pursuing a development project is zoning. The zoning laws of the area you are evaluating need to be thoroughly researched before you even consider building a house.

The commercial land that you want to build on may have zoning laws that are relatively relaxed or very restrictive. If it is difficult to obtain building permits and apply for a property conversion, pursuing the development on the commercial land you are reviewing may not be worth the trouble.

On the other hand, if zoning restrictions are not overbearing, converting the commercial land for residential use should be pretty straightforward.

2. Property Inspection

Once you have found a suitable parcel for building a house, you need to inspect the property to confirm that the specs are in line with your development plans. Not every piece of commercial real estate is suitable for residential development.

Whether you are developing the property for personal use or as an investment opportunity, you ultimately want to build a home in an area that is livable. The specs and qualities of commercial real estate can vary greatly, which is why I recommend that you conduct a thorough inspection before making any commitments. Consider the following when inspecting commercial land for building a house:

  • Location
  • Surroundings
  • Size & Space
  • Local economy
  • Amenities
  • Lease terms (if any)

3. Budget

Now that you understand the zoning laws of your local area and have inspected the property, you need to consider your budget. Creating a well-constructed budget for your development project is mandatory to determine if building a house on commercial land is financially feasible.

It can be easy to underestimate the cost of building a home, which is why I recommend that you assess your budget to make sure that it is suitable for your development goals. Regardless of whether you are an investor or an aspiring homeowner, building a house is not cheap, and confirming that the project is worthy of your hard-earned money will be essential. Consider the following when establishing your budget:

  • Property valuation
  • Real estate appreciation
  • Development costs
  • Permit costs

4. Re-Zoning Application

Applying for re-zoning is the most important step to legitimizing your building project. A re-zoning application can make or break development plans, which is why I recommend that you evaluate the property thoroughly before you commence with this step.

You need to consider that re-zoning commercial land for residential use needs to be approved by a committee. Members of the committee can contest your application if they do not think your development is in the community's best interest.

That is why having a well-thought-out plan that aligns with all zoning requirements is essential if you want to avoid red tape and a denied re-zoning application. If the paperwork is in order and your building plans are sound, the committee will approve your application to re-zone the commercial land for residential use, and you can start building your house.

5. Hire Contractors

The final step is to hire contractors to build your house. Given that the land was originally classified for commercial use, you want to choose a contractor carefully.

A lot of contractors are familiar with working in specific sectors, which is why you want to hire someone from the industry who is adept at handling dynamic projects. Be thorough when evaluating contractors in the area, and shortlist the best candidates that are suitable for the job before committing.

Pros & Cons of Building a House on Commercial Land

If you are considering building a house on commercial land, you should be aware of the benefits and drawbacks of pursuing this kind of development.

Being thorough and calculated will make a huge difference in determining if the project is feasible. These are the pros and cons of building a house on commercial land.

Pro: Appreciation

If you buy commercial land in the right location, the property can appreciate rapidly, resulting in a huge financial return down the line.

Pro: Income Opportunity

Building a home on commercial land can be a fantastic income opportunity. If you want to rent the property out, you may be in a unique position of holding real estate that stands out compared to other parcels in the area.

Pro: Secure Investment

Commercial land is a secure real estate investment, provided that you choose the right area to build your home. Property values in commercial areas tend to climb steadily over the years, ensuring that your investment is secured.

Con: Location

Commercial land locations can be hit or miss for building a house. You need to keep in mind that commercial land is often centered in busy areas without other residences nearby.

A home in a commercial area may be less attractive to future buyers if you ever decide to sell or rent the house.

Con: Zoning

Zoning can be a headache for developers and investors, especially when it interferes with your building plans.

Although you may have found a suitable location for building a house on commercial land, zoning could stand in the way of your development.

Con: More Work

The bottom line is that building a house on commercial land requires more work. You need to go through the process of re-zoning the property for residential use, which often requires you to jump through hoops to get the operation on the way.

In addition, given that the real estate was zoned for commercial use, there is a good chance that you will have to convert the building to a residential property. This often requires redesigning floor plans, plumbing, and other aspects of the building.


Brittany Melling

Brittany Melling

Brittany has been in the land business since 2020 when the world was starting to shut down. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.

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