Converting a small 3200 sq foot commercial building to a Duplex

Rehabbing & House Flipping
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Converting a small 3200 sq foot commercial building to a Duplex

Charlene Turczyn
Member since 2020 · 3 posts · 0 votes

We currently own a small commercial building, that I had my business in for a number of years.    Springfield Illinois is losing businesses at a rapid pace.    Our commercial building is zoned for multi family and is in an area surrounded by 4 and 6 plexes.   It is on 1.25 acres.  The commercial building is 3200 sq feet and has 2 heating/cooling zones.   The vacancy rate in the area for residential rental is 5%.   I can expect 1200.00 per month from each tenant side.  Commercial rents were going for about 10 per sq foot modified gross and have now dropped IF you can find a tenant.  The vacancy rate for commercial in Springfield is over 25%.    The building is located near(but not on top of) an exit to Rt 55 which easily takes you into St. Louis in an hour and 30 minutes and the airport.  The location takes you easily to all points into Springfield.  The building is also near the campus of the Springfield branch of the University of Illinois.    I foresee the building being empty for 2-3 years if we continue the commercial path.    The building was completely gutted in 2011 when I relocated my business, so its got new windows, new mechanicals, new insulation.    Would dividing the building in two and adding a kitchen and bathroom, make it worthwhile as a long term duplex rental?

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  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    5y

    @Charlene Turczyn do you want to invest somewhere in a place that is, as you put it, losing businesses at a rapid pace?

    Perhaps a duplex on your parcel is better than a commercial building. But it also could be the case that buying a duplex in a growing market would be a better investment than the conversion you're considering. 

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  • Charlene Turczyn
    OP
    Member since 2020 · 3 posts · 0 votes
    5y

    Unfortunately,   I own this parcel and selling it now is useless.   I paid 375,000 in 2011 and its now worth 124000 as a commercial building.   Believe me if I could I would have sold it.   Its been on the market for 4 years.  Mostly with a tenant but with Covid, our tenant is not renewing next year.

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  • Louis Jeffries
    Lender · Chicago, IL · Member since 2010 · 149 posts · 127 votes
    5y

    Is it worth converting? What is the cost of the conversion? What would the value be post conversion? What are the long term prospects? Is it close enough to be used as student housing? More questions before there is an answer. The way the question was posted it seems you are pretty sure what you want to do. Another question is do you need financing to complete this project? Is the building owned free an clear? Lots of questions.

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  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    5y

    @Charlene Turczyn that sounds tough, sorry to hear that.

    If the property has devalued that much in 9 years don't you think converting it would be chasing good money after bad?

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  • Charlene Turczyn
    OP
    Member since 2020 · 3 posts · 0 votes
    5y

    I am uncertain of what I want to do.   We've made a pretty good cash flow off the building in the last several years.    Cash flow values it at 247K    Depreciation and rental income have offset the cost.    I have a mortgage of 128,000 on this building.   I think its salable as a duplex eventually.   The duplex and home prices in the area are going up 2% a year.   I think it will take 50-75K to turn it into a duplex.   Right now my money isnt making anything in the bank.    Taxes are about 6000 a year,  utilities about 2400 and insurance about 1500.00, Maintenance about 1200.  Either way I'm thinking of paying off the mortgage.    The other issue is charities in the area will not take donated buildings at this time.  Otherwise I would donate to the University.   So as you see,  a rock and a hard place.    The building is a class B and would be perfect for lawyers, accountants and professional services.    All who are currently working from home.  

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  • Bob NortonPro Member
    Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
    5y

    @Charlene Turczyn Have you considered converting it into a 4 plex?  Would you be able to increase rents by having four units?  What would the value of the building be after converting it to a duplex or fourplex?

    I think investing $75k to get $2.4k per month in cash flow is a good investment, especially if you have the cash in the bank earning pennies.

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  • Shane Brooks
    Investor · Durango, CO · Member since 2019 · 33 posts · 4 votes
    5y

    @Charlene Turczyn Hello, I am looking to do the same thing and convert a basically wide open commercial building to a 4 unit residential building! What was the outcome on your zoning permits, timeline, and property tax dealings? Would love to pick your brain if you have gone down this path!

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  • Jingwen Ni
    Rental Property Investor · New York, NY · Member since 2018 · 14 posts · 9 votes
    5y

    I'm not familiar with the area. But from what I read, physicians still need a place to see patients. Is it possible to convert it to a physician's office or testing office? Some small businesses and start-ups also need a place to meet or be away from distractions at home. 

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