Zoning Variance

A Zoning Variance is an official permission slip from a local government authority that allows a property owner to use their land or building in a way that deviates from the local zoning regulations. Think of it as a special exception granted when the strict application of zoning rules would cause the owner “undue hardship” due to the property's unique physical circumstances (like its unusual shape or topography). It’s not a get-out-of-jail-free card to do whatever you want; the proposed use must not harm the public welfare or fundamentally alter the character of the neighbourhood. For example, if a bizarrely-shaped lot makes it impossible to build a home that meets the standard setback requirements (the minimum distance from the property line), the owner could apply for a variance to build slightly closer to the line. Granting this request allows the owner a reasonable use of their land without negatively impacting their neighbours.

For the savvy value investor, a zoning variance isn't just a piece of bureaucratic paper—it's a potential key to unlocking significant value. Many properties are undervalued precisely because current zoning laws limit their use. Securing a variance can fundamentally change a property's profit potential, making it a powerful tool in real estate investing.

The real magic of a variance is its ability to transform a property’s “highest and best use.” Imagine a large, single-family residential lot that, due to its size, could easily accommodate another small dwelling.

• Before Variance: The property's value is based on a single rental income or its sale price as a single-family home.
• After Variance: If you successfully obtain a variance to build a second unit (like a granny flat or duplex), you have now doubled your potential rental income streams and significantly increased the property's overall market value.

This is a classic value investing play: identifying an under-appreciated asset and, through a specific action, revealing its true, higher value.

Applying for a variance is an investment in itself. It’s not free and it's not guaranteed. The process involves:

• Costs: Application fees, costs for surveys and architectural plans, and often legal fees for a land-use attorney.
• Time: The process can take months, sometimes even years, with no certainty of success.
• Uncertainty: The decision rests with a local board or council, whose members can be influenced by community feedback and local politics.

An investor must weigh the potential return on investment against these costs and risks. A successful variance can yield spectacular returns, but a failed attempt means you've spent time and money with nothing to show for it. This is where meticulous due diligence becomes paramount.

If you’ve identified a property where a variance could create value, approaching the process systematically is crucial.

Before you even think about buying a property or applying, you must become a local expert.

• Read the Code: Get a copy of the municipal zoning ordinance and understand the specific rules for your property's zone.
• Check Precedent: Research past variance applications in the area. Has the board granted similar requests before? Under what circumstances?
• Talk to Professionals: A consultation with a local land-use attorney or a city planner can provide invaluable insight into your chances of success.

Your application needs to be persuasive. The core of your argument must be undue hardship, and this hardship must arise from the unique physical condition of the property itself, not your personal circumstances.

• It's Not About Profit: Simply stating that a variance will make you more money is the fastest way to get your application rejected.
• It's About Uniqueness: You must demonstrate why your property is uniquely burdened by the rules. For example: “This lot is unusually narrow, so a standard garage cannot be built without a variance for a reduced side-yard setback.”

While the potential upside is tempting, it’s crucial to distinguish between a calculated investment and a wild gamble. Buying a property that is only a good investment if you get a variance is highly speculative. The true value investor looks for a margin of safety. A better approach is to buy a property that is fairly priced and functional as-is, but which holds the potential for a variance as a source of additional, extraordinary upside. That way, if the variance is approved, you’ve hit a home run. If it's denied, you still own a solid asset that meets your original investment criteria. You've taken a calculated risk, not a blind leap of faith.