How to Convert a Commercial Property into a Residential Home?
More investors are choosing to convert commercial spaces into residential homes due to the increasing demand for rental properties. With the rise of e-commerce, many ground-floor commercial spaces remain vacant, presenting an excellent real estate investment opportunity at a lower cost than a traditional property purchase.
Is Converting a Commercial Property into a Home a Good Idea?
Converting a commercial space into a residential property is a great option for both investors and individuals seeking more affordable housing. These properties can be renovated and rented out for good returns or sold after refurbishment to maximize profits.
Although these properties are typically on the ground floor, many offer spacious, well-lit living areas, making them appealing to families and young professionals looking for alternative housing options.
Requirements for Converting a Commercial Property into a Residential Home
To legally convert a commercial property into a residential home, specific requirements must be met:
• The property must have a minimum usable area of 42 m² (28 m² for studio apartments).
• It must be located in a consolidated urban area.
• Rooms must have windows allowing natural light.
• The entrance must be independent and above street level.
• The property must have electrical, plumbing, telecommunications, and sanitation systems.
• Local zoning laws and community regulations must not prohibit the conversion.
Can the Homeowners' Association Object?
If the homeowners’ association regulations do not explicitly forbid the conversion of commercial properties into residential homes, the owner has the right to proceed with the transformation. Even if neighbors object, there are legal rulings confirming property owners’ rights to make such modifications.
Is a Change of Use Permit Required?
Yes. It is essential to apply for a change of use permit from the local City Council before converting a commercial property into a residential home. After approval, additional steps include obtaining an occupancy permit, signing the change of use deed with a notary, and registering the new property status with the Land Registry.
Cost of Converting a Commercial Space into a Residential Home
The total cost depends on the location and current condition of the property. Typical expenses include:
• Change of use project and occupancy certificate: approximately €3,500
• Total renovation cost: starting from €40,000
Example: Conversion of a 95 m² commercial space into a 3-bedroom, 2-bathroom home:
• Renovation cost: approximately €550/m² (€52,250)
• Change of use project: €2,500
• Construction supervision: €1,800
• Architect association approval: €300
• Municipal permits: €500
• Construction tax: €5,500
The total cost of converting a commercial space into a home could be around €60,000, which is still significantly more affordable than buying a similar-sized apartment in the same area.
Steps to Convert a Commercial Space into a Residential Home
To successfully complete the conversion, follow these steps:
1. Check local zoning regulations with the City Council and apply for a major renovation permit.
2. Obtain the renovation permit and complete the construction in compliance with regulations.
3. Sign the change of use deed at a notary’s office.
4. Register the new property status with the Land Registry and pay the applicable fees.
5. Update property records with the Cadastre and modify the property reference.
6. Apply for the occupancy certificate and an energy efficiency certificate.
It is important to note that this change of use may impact the property’s tax valuation, potentially increasing property tax (IBI).
Is Converting a Commercial Property into a Home Profitable?
Yes. One of the biggest advantages of this conversion is the significant cost savings compared to buying a pre-built home. The total cost can be up to 50% lower, leading to higher profitability.
Despite renovation and tax expenses, converting a commercial space into a residential home remains an attractive real estate investment, whether for rental income or resale. However, some buyers still prefer traditional apartments or houses.
Is This Investment Suitable for Everyone?
Converting a commercial property into a residential home requires financial liquidity or strong creditworthiness, as banks typically finance only 60% of the purchase price of commercial properties. Additionally, loan repayment terms are often shorter than traditional mortgages.
Conclusion
Transforming a commercial property into a residential home is an excellent opportunity for investors and homebuyers seeking affordable real estate alternatives. With lower investment costs and careful planning, it is possible to achieve significant long-term profits.
If you are considering converting a commercial space into a residential home or need expert guidance, Hoffmann Real Estate is here to help. Contact us today to explore your best investment options.
