Converting three family into a two family.

[Emillio Henry]

So I’m wondering if Converting my three family “college house” into a two family is an unwise choice. In reality the home functions as a single family however for building code, reducing the three family into two would put me in the local building codes and out of the strict state codes. 

In order to utilize two already existing bedrooms and about 500sqft living room I need to install a sprinkler system. In a three family under state code i would have to sprinkler the entire house, in a two family “local” code i would only be required to sprinkler third floor to first egress, which is a door on the first floor; so I’d have to sprinkler third floor and stairwell leading to a door on the first floor.

I plan on keeping the property long term, and just about the entire block that the house is on are college rentals next to a major university. 
i believe my house is the only legal three family on the entire block of about 40 houses.

Comps are hard to pull because of this this, just about everything I pull and appraisers have pulled are two family residences. 

Any direction would be greatly appreciated.

Thank you 

-Emillio Henry