Turning a property of cramped 2 BRS into a functional 1 BRs

[Greg Fitch]

I'm in contract to buy a 24 unit property that was built 40 years ago. The 2 bedroom units are tiny - 480 square feet. That's not even a very generous 1 BR but again that is the size of a 2 BR. The living/kitchen room is so small, and bisected by so many doors, that both barely function. And the biggest disconnect is the location - it is super nice, in a historic district, walkable to a vibrant downtown. The property is operating way below its potential. I inspected all the units and rarely saw both bedrooms with beds, so even now they seem to be used as a 1 BR.

Since cabinets, flooring, electrical, plumbing, etc. have to be upgraded anyways, is there a financial payoff for turning the units into 1 bedrooms - e.g. moving the kitchen wall into a bedroom, creating a design that looks and functions better? Or do 2 BRs always rent faster and for more money? A nice 1 BR, or a cramped 2 BR? Thank you, Greg