Office Building - first commercial deal, your thoughts?

[Shak Noor]

Hi BP folks, Working on my first commercial deal and would like your thoughts on this property/opportunity. There's a an office building in Texas for sale. It's part of a small office park, 4-5 total buildings total. For sale is one of the buildings. Downstairs and upstairs are currently separate suites. Nearby is very residential and there's a large retail strip center directly in front that is a bit run down (but on sale) so potentially will get a face lift upon sale. And next to that one is another strip center that he fairly new with a Signature Kroger (large grocery store) Office park was built in the early 80's and is all rented out except the 2nd floor in the building I'm looking to purchase. The 1st floor suite (2500sqft) is currently occupied by the owner. They have a medical office and his wife is the doctor. They want to sell and get on a long term lease for 8-10 years. 2nd floor is vacant and has been for quite some time. It js dated as well and needs new paint, carpet, etc. Each suite has approximately 7 offices, 1 conference room, break room area and bathrooms. Association fees is $1700/month for the entire building. This includes all taxes, all insurance, and all maintenance. Electric, water not included. It is for sale for around $225,000 for the whole building. Seller bought in 2001 for $175k and then put $100k into the first floor suite to outfit into a full blown medical office. He just wants to pay off his loan balance. But it's been on sale for about a year and the 2nd floor has been on the market to be leased for a year as well with no takers, few bites but nerve worked out. Was rented out for 5 years at a point but that company went under. With a 25% down payment, my monthly expense would be around $2500/month (loan & taxes/insurance/maintenance). I can get a minimum of $2000/month from first floor current owner on a long term Lease. Maybe $2200. I'm concerned about getting the 2nd floor rented out. I've thought about Renovating the 2nd floor to look like modern office space and rent each room out individually and they'd have a shared bathroom, breakroom, and conference room. I could charge $350-$500 per office and at 7 offices get $2k minimum from the upstairs. What do you guys think? Does this seem feasible? What are some things I should look into? Is there much demand for individual office space in a residential area not close to the center of town? Would love your insights and thoughts. Thanks, shak