My mother owns a building in what appears to be a pretty LCOL part of TN. I call it post-McDonalds/pre-Starbucks. She has about $200k in the building, I think she would settle for $185k, but hasn't gotten an offer better than $145. The building has been on the market for probably over two years. The building is probably the largest in the area—two floors, 6,000 sqft total. She has tried looking for a commercial lease, but I don't think any business really needs that much space.
Lately she has discussed giving it to me and my sisters (I have three older sisters—it was like having four mothers). We have thought about converting it to townhomes (five 1,200sqft units) and renting them, or some type of mixed-use space. Right now its zoned for commercial, but I think the city would be happy to see it rezoned.
Without having talked to a builder, we anticipate that we would need to spend about $100k to convert the units. We think we could probably generate about $35,000 a year once the mortgage is paid, probably about $15,000 while we have a mortgage.
Right now, as I understand it, there is no residential rental inventory. So we think that might be a real option. If we go with a mixed-use space, we're considering some type of "we work" space.
Another issue, if the building comes to us, none of us are willing to put our own money into the project. We would be willing to get a loan to cover any costs it would take to convert it. We are assuming that the building would cover the loan.
In short, it looks like my mom could sell it for a considerable loss, or, if she hands it off, we would need to invest some money for it to generate cashflow.
I'm looking for any feedback/facepunch you might have. Are we thinking about the space well? Am I missing anything? Thanks in advance.
