The retail vacancy assumption on a small-town four over two won't sit still

Zero rent and zero cost isn't the same as zero. Carry the heat and the insurance on that bay even when you underwrite no income.

Before you underwrite anything, check whether the four apartments upstairs are a legal use or a nonconforming one. Old main street buildings in small towns frequently have upper floors that were converted decades ago with no permit, and the current zoning may allow residential above commercial only by special use. Zoning and the process for confirming a legal nonconforming use vary by state and by municipality, so read the actual ordinance and then go ask the code officer in person.

Why it matters to your numbers: if the residential is nonconforming and the building is substantially damaged, some ordinances won't let you rebuild the same unit count. Your insurer may also treat it differently. And a lender who discovers it at appraisal can reprice or walk five days before closing, which is the version of this that actually hurts.

While you're at the counter, ask about the fire separation requirement between the commercial ground floor and the residential above. That's the retrofit that shows up as a surprise when a new food tenant applies for a permit in Storefront B, and it's the reason a lot of small-town bays sit empty. The rent isn't the constraint. The cost of making the building code compliant for the tenant's use is.

Something worth pricing separately: what's the lot worth with nothing on it, and is there parking behind. In towns that size the buildings with a rear lot trade differently from the ones without, because that's what lets a tenant with any volume actually operate. If you're buying a building that can only ever serve foot traffic from a street with 4,000 cars a day, your tenant pool is smaller than the square footage suggests.

I'd also look at the two or three buildings on either side and find out who owns them. If one person owns four storefronts and is holding them empty, they set the rent in that town and it's probably lower than you think. If the owners are all separate and mostly occupants, rents hold up better. That took me one afternoon at the assessor's office for a similar street and changed what I was willing to pay by about 12%.

hollow's point about calling every business on the street is the one I'd act on first, and I'd do it before I spent money on inspections.

The question I'd add for you: what happens if the salon leaves. Eleven years and a verbal arrangement means she's old enough in that space that retirement is a real event, and she's paying about half what the bay would need to earn. So run the case where both storefronts are empty at once, apartments at current under-market rents, boiler replaced in year two. If that case still makes the payment with your reserve intact, you've got a building you can hold through a slow leasing period. If it doesn't, the deal depends on leasing 2,500 square feet of small-town retail on a schedule, and that's a different thing to be buying.

I took nine months on my last one and the only thing I regret is not asking the seller for two full years of utility bills earlier. On a single boiler serving six spaces, that bill is the whole operating story and it's the easiest document to get.