You just got a listing appointment, and the house is next to commercial properties, on a noisy, busy street. As a residential agent, you despair for a moment and ask yourself if this will have a potential impact on housing prices if used solely as a home. Before you allow yourself to be too sad, you need to ask yourself if this house can be an adaptive reuse and if it would sell for more commercially.
The easiest thing to do is ask a trusted commercial real estate agent and, if possible, refer it out due to their expensive tech and databases; then you get a check for just giving them a name. But, if you have familiarity with commercial transactions and have a good mentor, you might want to try to sell it first. You think, "This would be great for a boutique store, accountant's office, or landscaping company's light industrial space." Where do you begin your research and how do you know what someone could do with the building? You need to get some answers. Here are the questions you need to ask.
Does the property have commercial zoning? How likely is it that the property could be rezoned? Be careful not to promise any specific use would be allowed. Have any potential buyer check with the municipality directly so you won’t be held liable if you are wrong. Do not imply the city will or will not rezone.
Next, consider parking within code for the different uses. Will the local codes require a full-building retrofit? Does the code mandate front or back parking? Can the property get internet? Can the building handle commercial utility requirements? Can the building be upgraded for American Disability Accessibility?
Not all residential neighborhoods have enough foot traffic for shopping. Some are far from the street and have poor visibility. Sometimes, the building won’t work physically because bearing walls can’t be moved. With light-industrial zoning, the property itself may not sustain heavy equipment.
If the property next door stays residential, regardless of use, your buyer may need a visual or sound barrier, specific lighting, and privacy barriers once complete and all of this can potentially affect the asking price. Would the price of the property be a good investment to a buyer, in other words, if the property were rented at market rent, would the income cover an anticipated mortgage and the debt service coverage ratio? An owner-occupant will pay slightly more than an investor, but for the buyer to get a loan, that factors into the final sales price.
You'll need commercial vendors and lenders. Marketing on commercial channels will be expensive. You might have second thoughts after all your research and would rather refer it to an experienced commercial agent, but if you do proceed, you now know some questions to ask. Best of luck selling!
With a childhood passion for building and a knack for community transformation, Jana Truman brings a unique perspective to commercial real estate. Known for connecting the dots in complex deals and speaking ‘residential’; Managing broker for SVN Accel Commercial Real Estate, Jana is the go-to expert who maximizes value and maintains strong relationships, benefiting clients and residential agents alike.
