Did anyone here buy into a mixed-use with a co-working or flex-office component on the second floor instead of residential

Co-working on a short term prices like residential but carries office vacancy risk.

What is the current cap rate being used to value that second floor, and does the seller's proforma assume renewal at $18 or a vacancy period?

The replacement tenant question is the real one, and in a market 40 minutes from Tulsa the honest answer is that 3,200 square feet of second-floor office has a shallow demand pool regardless of what the co-working operator does. Second-floor office in a small-city mixed-use building typically trades as professional suites, medical billing, insurance, or a single-tenant professional firm, not another co-working operator, and those tenants often want 5-year terms with TI, which means you are funding a buildout before you see stabilized income.

On the conversion question: a mid-building residential conversion is not just a zoning question, it is a mechanical and egress question. Say you spend $80 a foot to bring the floor to residential standard, that is $256,000 on a 3,200-foot plate, and that number moves sharply upward if the existing HVAC, plumbing stack, and egress stair do not line up with where apartment doors need to go. The city may cooperate on zoning but the building permit will surface whatever the inspection deferred last time, so you want a licensed contractor walking that floor with you before you sign, not after.

The assumption doing the most work in your underwriting right now is probably whatever you penciled in for the second floor at month 15. If you modeled it at $18 a foot with a quick re-lease you have a number that depends on a single-location operator with a thin track record, and a market that may not produce a replacement at that rent inside 12 months. What does your return look like if that floor sits dark for 18 months and you absorb a modest TI to land a professional tenant at $14?

The conversion math is where I'd start, because it reframes what you're actually buying. If gut-and-frame residential conversion on that floor runs $60 to $85 a foot in a secondary Oklahoma market (confirm with a local GC, that range moves fast right now), you're looking at $192k to $272k to turn 3,200 feet into something with durable demand, and that cost needs to be in your MAO before you negotiate, not discovered after you're under contract.

The piece worth thinking through separately is what the city's zoning actually requires for a mid-building use change, because some municipalities treat floors three and four as the controlling residential use and permit the conversion administratively, while others require a full conditional use hearing that adds four to six months and real carrying cost. A quick call to the planning department before you make an offer costs nothing and tells you whether conversion is a 90-day process or a gamble.

On the co-working operator specifically, a single-location tenant with a short remaining term and no verifiable track record past 2021 is functionally a month-to-month for underwriting purposes regardless of what the lease says, so the honest question is whether the property pencils if that floor goes dark on day one of your ownership. What does your cap rate look like if you stress-test it with 3,200 feet of zero income for 12 months while you find a replacement or pull permits for conversion?

The number doing the most work in your underwriting is the co-working rent, because $18 a foot in a secondary Oklahoma market is almost certainly above what a replacement office or flex tenant would pay, which means your going-in cap rate has phantom income baked in. Confirm what comparable second-floor office space is actually leasing for in that submarket before you touch the pro forma, and pull any recent lease comps from a local commercial broker, not the listing broker.

On conversion, the cost question and the zoning question are separate problems that people tend to conflate. A mid-building residential conversion in a market that size typically runs $60 to $90 a foot for a basic finish depending on HVAC separation and plumbing stub-out requirements, but Oklahoma municipalities vary significantly on whether a mid-building use change triggers a full rezone or just a conditional use permit, so that conversation with the city planning office needs to happen before you underwrite the hedge, not after.

What does the co-working lease say about assignment and subletting, and does the operator have a personal guarantee behind it?

The piece worth pinning down before anything else is what the co-working operator's own renewal option looks like, specifically whether he has one, at what rent, and whether he has to declare before or after your close, because those three details determine whether you are buying a known vacancy or a functioning lease.

What is the current NOI on that floor as a percentage of your total purchase price, and does the seller's pricing assume renewal at $18 or does it already haircut the co-working space to zero?

The replacement tenant pool for a 3,200 square foot second floor in a market that size is genuinely thin, and the people who might want it, insurance offices, small law firms, a regional nonprofit, tend to own their buildings in towns like that rather than lease. So you're not just buying a vacancy risk, you're buying a vacancy that could sit for eighteen months while you figure out who the tenant even is. The conversion question is real but I'd call the city planning office before you spend money on a feasibility study, because some of these smaller Oklahoma municipalities have parking minimums tied to residential that kick in the moment you change use on a floor and the lot math may not work. The month-to-month tax prep tenant bothers me as much as the co-working piece, because that's two floors with near-term exposure and tax prep businesses run January through April and then go quiet, so if they decide not to renew you may not know until February when it's already too late for that cycle. What does the seller's rent roll actually show for the co-working operator, base rent only or does it include any kind of CAM recovery, because at $18 a foot with no CAM that number gets worse fast.

Price that floor at zero income for 18 months and see if the deal still works.

Say you paid $1.2M for the building and financed 75 percent at a 7.5 percent rate, so your monthly debt service runs roughly $6,300. The 3,200-foot co-working space at $18 produces $4,800 a month. If that tenant walks at month 14 and you spend six months finding a replacement and another six building it out, you have absorbed $57,600 in lost rent before you collect dollar one from whoever comes next. That is not catastrophic on its own, but it lands on top of whatever you paid for the building, and it assumes you found a replacement. The question is whether your stabilized apartment and retail income covers debt service without the second floor, because that is the scenario you are actually buying into for a meaningful stretch of time.

The conversion path is worth pricing before you close, not after the tenant leaves. A second-floor residential conversion in a small Oklahoma market typically runs $60 to $90 a foot for light-to-moderate work, so call it $190K to $290K for 3,200 feet, and that assumes you are not fighting a load-bearing layout or a stair configuration that the city's egress requirements will not accept. The zoning question is real and specific: mixed-use overlays in smaller cities sometimes treat each floor's use as a separate condition of the original permit, and adding residential units mid-building can trigger a full site plan review. That is a call to the city planning office, not a guess, and you want the answer in writing before you buy.

The one-location operator with no verifiable track record past 2021 is the part I would not rationalize. A co-working tenant who opened during or just after a period when

The risk nobody has priced here is the co-working operator's own lease obligations to his members. If he folds mid-term, those members may have paid upfront for six or twelve month access, and depending on how the master lease is written, their claims could complicate your ability to retake possession cleanly, because some operators structure member agreements as sublicenses that survive the head lease in ways that are genuinely ambiguous under Oklahoma landlord-tenant law. Get the master lease and every member agreement template before you go under contract, and have a real estate attorney read the assignment and subletting clauses specifically.

On the conversion question, the city's zoning administrator is the call to make before you model anything, because a mid-building residential conversion in a small Oklahoma municipality often triggers a full change-of-occupancy review under the adopted building code, which in practice means sprinkler compliance for the floor being converted, and that bill in a 3,200 square foot floor can run $40,000 to $80,000 before you touch finishes.

What does the co-working operator's current occupancy rate look like, and did the seller disclose whether the $18 per foot was a concession off a higher ask or the rate he actually got from day one?

What does the building look like mechanically, single stair core or does it have a second egress on the second floor already? That's going to drive conversion cost more than anything else in a market that size.

I had a commercial bay go dark on me in Seguin, smaller footage, and the thing that saved me wasn't finding a replacement commercial tenant, it was that the plumbing stub-outs were already in the slab from a prior build-out. Saved probably $28k in rough-in. On a floor that's been co-working, you've likely got open ceilings and minimal wet wall infrastructure, which means adding bathrooms and kitchen stacks costs real money before you even touch finishes.

The $18 a foot feels like a number the operator needed to make his model pencil, not what that market actually supports for that use. I'd want to know what retail on the ground floor is trading at per foot in that city, because if your occupied bay is at $14 or $15, that co-working rent already looks like it was stretched.

Before you get to conversion feasibility, pull the co-working lease and read the assignment and subletting clause, because if the operator can hand the space to another party without your consent you have almost no control over who occupies 3,200 feet for the back 14 months. Also check whether there is a personal guarantee or just an entity signature, since a single-location operator with three years of history is essentially a lease backed by goodwill.

On conversion cost in a small Oklahoma market, the number that matters most is whether the floor has plumbing rough-ins, because adding bathrooms and kitchens to a floor that was built for open office can run $40 to $60 a foot in materials and labor alone before you touch permits, and in a 40-minute-from-Tulsa market your finished residential rents may not support that spend at any reasonable yield on cost. Get a local GC to walk the floor before you model it as a hedge, because the hedge only works if the conversion pencils.

What does the city's zoning currently allow on that floor, and has anyone pulled the certificate of occupancy to confirm the building is classified mixed-use through and through rather than commercial with a residential overlay?

What does the rest of the building cash flow at if that floor sits empty for two years? If the eight apartments and one retail bay cover debt service without it, the co-working risk becomes a nuisance rather than a deal-breaker.

I looked at something similar in rural Tennessee, never pulled the trigger, partly because the city had a one-year moratorium on residential conversions in mixed-use buildings downtown while they rewrote their zoning code. Oklahoma cities that size can be unpredictable the same way, so I'd call the planning department before you spend another hour on conversion math.

$18 a foot from a single-location operator with no verifiable history past 2021 is optimistic, you're right, and whoever set that rent probably needed it to make the acquisition pencil.