Renting a single family by the room ?

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I'm looking at an off market deal which is a 3 story, 7 bedroom with a bathroom and kitchen for each level. Needs lots of work, but the electric, plumbing, and roof all been redone this year, and its a nice brick house so won't need any siding work in the future. The house is within walking distance of 2 great colleges, and I own a duplex with a partner a few blocks away. 

Now for the questions.  It's currently zoned as a single family, but I'm looking to rent by the room for a fixed amount, and I'm wondering if this is even legal? Anything I need to look out for on the business / legal sides? It's also a row house with off street parking, would this be a turn off? 

House needs about $15K - $30K depending on how much of the work I hire out, I'm a full time contractor so insulating, sheetrock, and flooring is nothing for me. Comparable properties rented by the room in the area are going for $600 everything included, so this property if rented with 5 rooms should be bringing in about $3000/month. They're asking $35K for the house, and I'd be paying cash. Does it sound like a good deal? I plan on finishing the first floor and getting it rented, so I'm break even while I move onto the next floors. 

Anyone out there have success with renting by the room in college areas? How hard is it to get tenants? Any types of special things to include in the leases? Thanks in advance!