Can New Construct Fourplex-Each licensed as B&B, be run as Hotel?

[Davido Davido]

Question for Bigger Pockets community and investors doing Multifamily or Medium Density Residential construction, or those operating AirBnB, Vacation Rentals, Hostels and Rooming Houses or Boarding Houses; -what problems am I likely to run into by building a fourplex in medium family residential zoning then licensing each single-family residence of the fourplex as a separate Bed and Breakfast and essentially operating the fourplex as a small hotel?

I’m exploring the idea of building a permitted four-plex as authorized in our medium density residential zoning, then licensing each living unit as a separate Bed & Breakfast business.  The result would be four separate Single Family Residence B & B’s operating in a single multiplex building.  The design would make it possible to rent over a dozen rooms for short term stays as though the building was a small hotel, but the property would have Medium Density Residential zoning, -not the commercial zoning normally required for a hotel. The building code in my area permits Bed and Breakfast businesses in Single Family Residences (with MDR zoning) of up to 5 bedrooms.  The code  in my area also defines a “hotel”, as a building containing greater than 5 rooms that are rented for short term stays. What problems, if any, would you anticipate from local code enforcement or zoning boards with this plan?

Details: Each floor would be a separate residence containing 4 bedrooms and 5 bathrooms (a bathroom attached to each bedroom and a central house bathroom). Each floor would have its own kitchen and exterior doors.  However, each residence (each floor) would also have an internal stairway between floors.  Doors to the internal stairwells could be closed and locked when each floor is being used as a private residence, or the doors to the internal stairwell could be unlocked and opened to permit access between floors.  Unlocking the doors to the internal stairways would provide the flexibility to utilize the four single family residences as the functional equivalent of a small Hotel or as any combination of 2, 3, or 4 residences.

One advantage, to permitting such a building as a multiplex instead of as a hotel, is that Medium Density Residential (MDR) zoning required for a fourplex is available in many more places than is the commercial zoning required for hotels. Another advantage is that MDR land and development costs are less than commercial land and development costs. In addition, AirBnB adds for this property could be written to attract groups of all sizes as well as individuals and couples.  There is reported to be an unfilled demand for large group AirBnB housing.  New businesses are being formed to cater specifically to large group AirBnB rentals.

I understand that under most zoning codes changing the occupancy from longer term single family residences to shorter term or “transient” housing requires compliance to the stricter building code for transient occupancy.  For example, a hotel requires a number of fire hazard improvements that would normally not be required of a residence -such as a fire suppression sprinkler system. The extra costs of meeting the code for transient occupancy is not a limiting issue for me.  It is likely that building to the stricter code for transient occupancy would be money well spent.  Rather, I’m looking specifically for ways to maximize income potential from parcels that are zoned medium density residential.  A dramatic increase in profitability can be achieved in housing investments by increasing the occupancy load and by renting for shorter stays at higher prices.

It seems to me that if this fourplex receives all permits required for multifamily housing, and if each living unit in the fourplex is a properly licensed Bed and Breakfast -with all taxes paid, then each living unit is being properly used for the occupancy originally permitted. I believe it would be difficult for a zoning review board to claim that merely opening an internal doorway between separate residences, changes the occupancy so as to create a zoning violation.

Your thoughts and suggestions are greatly appreciated.  Please, let me know what you think.