Have you ever been townhouse hunting in New York City and come across the term Floor Area Ratio or FAR? Most home buyers in New York will never encounter this term, and if they do, it likely won’t be of much importance. The exception is if they are purchasing a home to flip it. If the home is advertising that it has an excess floor area ratio to build, it can be worth doing a FAR calculation. Savvy developers who want to maximize their profits should pay close attention to it, whether they’re planning to make use of it or not.
What is the Floor Area Ratio?What is the Floor Area Ratio?
The strict definition of FAR is the ratio of the total building floor area to the size of the plot. However, such a description will fly over most people’s heads, so it helps to simplify it. In layman’s terms, FAR is the total floor area (including all the space covered by the floors in the building) divided by the total land area on which the building is set. When you multiply this number by the total land area available to you, you get the maximum floor area you can have built on this plot.
For example, if you have 6000 sq. The feet of land and the building have just one floor; it has a floor area ratio. If the same building has two levels, each floor has only 3000 sq. Feet then the floor area is still just one. Its purpose is to serve as a zoning tool to allow developers some creativity in how they wish to build their structures. At the same time, it also limits the total amount of floor space on a lot.
Why is the Floor Area Ratio Important?Why is the Floor Area Ratio Important?
Savvy buyers who know how to make the most of FAR can reap enormous profits. For instance, if you buy a property with an extra floor area ratio, you could add additional stories or frontage to the building. Likewise, it can be beneficial to purchase property in a pricey neighborhood with a high average price per square foot. Finally, if the building has excess FAR, it may even be a good idea to tear the building down and build a new one from scratch to maximize FAR.
What if a building has FAR more than its maximum limit?What if a building has FAR more than its maximum limit?
If you encounter a building with FAR more than the maximum limit, it could violate local zoning ordinances. If you notice this in a building you are considering buying, you should have your lawyer perform a due diligence check. Otherwise, you could find yourself stuck with having to fix the violation out of your pocket.
If you’re in the market for a townhouse, it should already be mandatory to have a home inspection done. It will alert you to any defects, such as structural problems, electrical issues, or a FAR more than its maximum limit.
Anyone planning to purchase and flip a property should take note of the floor area ratio. Remember that even if a property is not using its maximum FAR, it still represents value. It can mean profitable renovations or a loss when buying a property more than its FAR limit.
