Rental Property
The Options To Convert Your Rental Property
By
Jan 13, 2006, 11:20

There are different options to convert your property into a profitable cash machine. We are discussing several methods in this article.

Converting Apartments to Office Space

Office space rents for twice the rate of comparable apartment space. It would therefore appear highly profitable to convert apartments to office space. But before you go ahead with such a conversion, consider some important questions:
* Is the property you wish to convert within a commercial zone? If not, can the zoning be easily changed?
* What is the current vacancy rate for office space in the area of the subject property? If too much space is already available, it would be unwise to convert.
* Does the property have adequate parking for office space? Typically, the city will require one parking space for every 500 square feet of rentable office space.
* How much will it cost to convert? Could you borrow the money to finance such a conversion? And, finally, will the cost, legal procedures, and time and effort be worth the eventual profit you will realize?

Study the situation carefully. Thoroughly analyze the finances of the projected conversion. Keep in tune with the requirements given, and if you can convert and finance at a reasonable cost and still earn a substantial profit, then go ahead with your plans.

Converting a Home to a Family Dentistry Center or Law Office

Based on the premise that office space rents for twice the rate of residential space, converting a home to a dentistry center or law office offers much profit opportunity. Of course, not just any home is ripe for conversion. The prime candidate should be located on a busy street with enough square footage and land to accommodate a thriving business.

You have to keep your eyes open for certain changes occurring in your area. Expanding roads, new interchanges, and such can all present opportunity for the shrewd investor who has the ability to make profitable conversions.

Bear in mind that if you consider a similar conversion, you will probably need a change in zoning from a residential to a commercial usage.

Converting the Garage to a Rental

In many middle-class neighborhoods throughout America, you'll often find an attached garage converted to a rental unit. However, before going ahead with a similar conversion, there's much to consider, because you could be seriously inhibiting the salability of the house.

At first glance, it appears such a conversion could be lucrative. A converted two-car garage could rent as a studio apartment for about $300 per month. Renovations would entail removing the garage door, installing an entry door, and erecting a wall. Carpeting would be needed, plus a bathroom and a small kitchen area. Of course, a conversion of this type would be more feasible and economical if the garage walls were already finished and there were existing plumbing lines in the vicinity of the garage.

The total cost would probably be in the range of $3,500, which would be returned to you within one year through rental income. That's the good news. The bad news is that if you go ahead with such a conversion, you no longer have a garage, which could inhibit the sale of the house. This is because most homebuyers require a garage. Not only do they use it to store cars or other items, but it's also an ideal place for a handy person to have a workshop. Consider such a conversion only when a storage facility isn't needed, and when you plan on occupying the converted house over a long term. However, if you plan on eventually selling the house, remember that most homebuyers would prefer a garage to a rental unit.

Land Banking

Also considered a form of conversion is land banking, which is a method of investing in strategically located residential property with the intention of converting it to a higher, more profitable use.

The method of operation was to purchase residential properties located on major thoroughfares that were on the outskirts of Lansing, yet were considered to be in the path of progress as the city expanded. Within four or five years, the property eventually be converted from a house to a thriving commercial development. In particular, he specialized in corner lots where a small mini-mart, restaurant, or small office building could be located.

The idea of land banking is sound, because instead of buying raw land without any improvements on it, you buy improved property (a house), which can be rented out and depreciated until you convert it to a higher use. If you just owned vacant land, you would have to pay taxes and mortgage payments on it without any income coming in. And, more importantly, you can't depreciate a parcel of land without any improvements on it.