Splitting a large single tenant building on downtown main street?

Question

My family has a large (7500 sq ft) retail building on a small hometown type main street. The main street is mostly full of smaller boutique type retailers. We feel we can get much more rent per sq ft if we were to split the building into 3 or 4 smaller units.

We are thinking one main entrance that would lead into a long hallway that would extend all the way to the back of the building, this would allow access to all 4 units. Would probably keep one meter and include utilities in the rent. But how would we insure each unit had it own mailing address? Would we need to file something with the post office?

Would we need to get permits from the city to make this a multi tenant property? I've reach out to them but no one has gotten back to me yet.

Kevin Sobilo · Answer

@Ryan Standage, you want to talk to the zoning officer in your town and read the zoning ordinance. The zoning ordinance is how they control what you may use your property for. This is how they keep someone from building a factory in the middle of a residential neighborhood.

If that use is allowed in that zone, you're off to a good start. If it isn't you may need to ask for some kind of variance to allow the use.  However, you still need to investigate the zoning ordinance itself carefully because there may be requirements to the use. For example a small city near me requires 1.5 parking spaces for each residential rental unit. So, they would require you to have 6 spaces for 4 units either on the property or leased long term ~20 years within so many feet of the property.

Once you have addressed zoning, then you want to discuss plans with the building inspector. Some places have additional requirements when converting an existing properties use. The same small city near me requires a sprinkler system whenever you create a building with 3+ residential rental units.

Joel Owens · Answer

Might be more rent but definitely more work than STNL absolute NNN lease. So the question becomes you need to analyze each way single versus separating out. Your building could be grandfathered in but upon wanting to do all these changes could now open a can of worms where the city or county wants everything upgraded.

It all comes down to how hard you want to work versus the money you make. At my age of 47 now I like more passive investments without the headaches working years on end for perceived additional yield that may or may not materialize.