I have a 2 family house. The apartment I'm speaking about here is on the 1st floor. I have attached a picture with details of how its setup and what I want to do.

Green = projected changes.

I have this huge living room with 2 windows on each side. I suspect this used to be a bedroom and a living room.
The area I want to close off already has an indoor closet, light switch with it's own light fixture, 2 windows, and radiator.

The only thing is if I close it off the hallway (entrance to the apartment) will look a lot smaller and I'm not sure if it will make sense or if it will even be legal.
I circled the area in red where I think will be too small since I will put a wall up.

Any ideas of what I should do here?

 

The entryway certainly looks pinched in your drawing. How wide would that be?

 

Legal is the first question that comes to my mind. How are rental units regulated in your community?

Personally I would not put the door where you showed. Have that a long continuous wall and move the door to the end of the hallway at a 45 degree angle. The long wall will make furniture placement easier and having the door to the bedroom at the end of the hall will make it a sorta straight shot for moving furniture.

 

The hallway is about 4 feet wide.
And I agree but how would it look having a bedroom door right there by the entrance of the apartment.

There is no really no special regulations for rental units here. I think I'm just required to have a window.