Blog Summary:
Whether you can rent out or live in a commercial property depends on its zoning and insurance. Properties zoned exclusively for business typically need to be rezoned as residential or mixed-use to accommodate living spaces.
If you’re a business owner trying to live in a commercial space, it might be possible if the property is already zoned for mixed-use with a certificate of occupancy in place, that is allowing residential use. Otherwise, rezoning of the property and obtaining approval of the local community board would be necessary, which could be a lengthy and encumber some process. Insurance also plays a key role, as commercial properties carry more risk than residential ones, often requiring separate policies for mixed-use properties. Other obstacles can be the layout of a commercial property where a commercial property floor plate is too large to create a habitable and efficient living space and may not fit a residential unit layout requiring windows in every unit for example, plumbing heating and cooling and electrical infrastructure etc.
Consulting with a commercial real estate expert to fill your commercial property vacancy can simplify the process of finding potential tenancies that fit the current use and occupancy of the property.
Whether or not you can rent our or live in commercial property is dependent upon how that property is zoned and insured.
If you are a landlord looking to convert commercial property into residential property, and the property is currently commercial only, it will likely need to be re-zoned as a residential or mixed-use property.
Can you live in a commercial space, though? If you’re a business owner trying to live in a property that you also operate a business in, that might be possible if it’s already mixed-use in nature, but if it’s commercially zoned, it too will need to be re-zoned.
Then, there’s the issue of insurance to contend with because commercial property comes with more risk than residential property.
What is Commercial Property?
Commercial properties are specifically designed (and zoned) for business use. Zoning, in turn, refers to the “municipal or local laws or regulations that govern how real property can and cannot be used in certain geographic areas.”
Commercial properties are zoned such that they are meant for business activity. So, can commercial property be used for residential purposes? Not unless it’s either A) rezoned or B) zoned for residential as well as commercial use, as long as the general layout of the property will also suit a residential unit use.
What is Residential Property?
Residential property is designed and zoned for residential use. It’s also constructed to fit such a use. Therefore, residential properties include everything from single-family homes to multifamily apartment complexes. The commonality is that residential property is intended for people to live, not work in.
You might be wondering: “What about working from home?”. In the vast majority of cases, working as an employee for another business doesn’t violate residential zoning laws. That’s because residential zoning is intended to prevent operating a business from your residence and using your residential address as a business address.
Running a business from a residential property would bring lots of traffic, clients, noise, and so forth to a residential community.
In urban areas, like the NY metro area and tri-state area, where this type of traffic is already commonplace, you’re more likely to find mixed-use properties.
What is Mixed Use Property and How Do I Find One?
Mixed-use properties are designed and zoned to accommodate both business use and residential use.
You can work with a knowledgeable real estate advisor to help you find a property that is already mixed-use.
Or, you may be able to re-zone your property to be mixed-use (though this is often very difficult).
How Does Insurance Differ for Different Types of Properties?
Not only are local governments and municipalities concerned about the noise, traffic, and risk associated with commercial activity, but insurance companies are also concerned with how properties are both classified and insured.
Commercial properties are associated with much more risk than residential properties. Often, when leasing properties that are mixed-use, tenants must sign separate leases for the residential vs business portion of the property and obtain separate insurance policies for each as well.
Conclusion
Can you live in commercial property or rent it out for others to live in? The simple answer is not unless it’s commercially and residentially zoned for mixed-use, or you are able to re-zone it as such. Giving the current market conditions and the available inventory, we recommend identifying the proper property for your intended use beforehand to save on time, effort and of course the economics involved. To do that, we invite you to contact us and learn more about our investment sales and landlord tenant representation teams standing by to answer any questions you may have and help achieve your goals. Looking for an exciting opportunity to own a mixed-use property, which is undoubtedly the easier route? Browse our properties for lease and sale in the tri-state area.