Commercial property development

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I have found a commercial REO property that has an existing SFR that has been converted to a retail/office space and a basement apartment.

This property is located on a busy downtown street it has a 1,000 sf basement apartment that with some renovation will make a nice 2/2 apartment. At street level there is a 1200 sf retail office space and a separate garage. The retail space is ugly but the lay out is good and it could easily be setup with 4 offices with a nice waiting room. It is my intention to convert the existing garage into my business office.

There are separate meters for the existing retail/office space and the basement apartment.

In my market the 2/2 apartment should rent easily for $800/mo currently have no tenant. The retail/office space I have been doing some research on. It seems that I might be able to get 1,000-1,200/mo for the space. Zoning allows for medical/dental, construction, and light retail. Paring is the biggest limitation at this time.

I can purchase the place all cash for probably 150-160K. My plan is to do make some renovations now, but to eventually tear down the structures in approx 5 years when it is fairly likely that a 3 story mixed use bldg and parking could be built. It is hard to say how long I may need to hold the property before developing it, but the property will have good cash flow and I expect to have decent exposure for my business at this location that will increase my business prospects as well.

I would love to get comments from developers, flippers and others far more experienced in this than me. This would be my first retail/office space and I would like some advice.

[Joel Owens]

Would have to know more about it.The best leasing info in my area is from Costar.

You can find out what everyone else is paying,class of building and amenities,and when their leases are coming up for renewal.

When you buy this building are their any height restrictions for redevelopment??

Often the class of building and requirements expected by the city or the county can greatly ramp up building costs and delays.

How large would the new building you want to build be approximately??

When the developers I have worked with do a tear down a place with asbestos and other things costs much more to demolish.You would think you would just tear it down but they want all that remediated and removed first so it doesn't go airborne during the tear down.

Building cost 5 years from now is impossible to speculate.Labor and materials could be way up and LEED demands might be a requirement then.

Can an additional level be built on the existing structure if it is beefed up at the bottom?? Then you can just reface the outside and update the interior.

The city and county over time also change how they view development.In five years you have different people in office which might be pro-development or anti-development.

So there is a ton of factors that play into it.Right now you can land great contractor teams in commercial for cheap.Once the big jobs come back around it will be harder to find quality work for a small job such as you are proposing.

Hope it helps.