I'm looking at buying a duplex as an investment property, but it has an odd zoning issue that I'm not sure how to handle. After the property was built the area was rezoned to Light Industrial (ie, workshops, mechanics, warehouse, etc). The property was grandfathered in with a Non-Conforming Use permit.
However, one of the stipulations on the permit is that if the structure is more than 60% damaged, it has to be rebuilt in accordance with the current zoning. So if it burns down it couldn't rebuild it as a duplex, it would have to be something industrial. According to two insurance agents I've talked to, homeowner's insurance won't cover rebuilding the structure into something different - they only cover rebuilding to a similar kind and quality of structure. So the structure is basically not insurable against major damage. In addition to the added risk, the lack of insurance also means I can't get conventional financing.
One possibility is that I could try to line up unconventional financing to purchase the property, fix the zoning problems, then switch to conventional financing later. Clearly that involves extra work and risk above a typical purchase arrangement.
So...
1. Is there some sort of unconventional insurance and/or financing product that might handle this situation?
2. Is my idea about buying now and changing the zoning a reasonable one?
3. If I do buy it with the zoning issues, what's a reasonable discount to the purchase price to justify the extra work & risk?
Thanks in advance.