No, the “great divide” isn’t between residential and commercial, nor between owner occupied and rental.  

Just divide their purchase price by their gross heated square feet excluding garages. 

If you are going conventional, they will need 2 years of tax returns, no way around it.We will use your "net income" after all deductions for 2022+2023 and divide over 24 months.

Cap rates are income divided by purchase price and the property has little to no income. 

Multiply that by 52 and divide by 12 and it may sound uncompetitively high to you to compete against a studio?

Rogelio,I would check with a local Title Company to ask generally what they have seen in the past.Check with an insurance agent, even specifically the borrower's insurance agent, as to required terms.Finally, armed with that info: work with an attorney to draw up ironclad docs.My 2 cents,Mike 

The Average Rate of Return is calculated by taking your average net profit and dividing it by the total investment.So in your scenario, the total profit is -$50 over a period of 2 years, giving you an average net profit of -$25.

Either way, you want to be close to something that is drawing visitors to the area or you'll likely face too much competition to be profitable in my opinion.  

The long and short of it, you'll more than likely need an architect to draw plans to do the conversion.

@Mayer M. do you divide your total hard costs by total building sqft, or finished sq ft or some other measurement?