Renting In-Law unit on AirBNB?

[Phil Janasac]

My wife and I are looking at purchasing a multi-unit in the Jefferson Park neighborhood of Chicago. We would owner-occupy and rent out other units. There’s a two-flat we’re currently interested in that has a finished one-bedroom basement with a private entrance, full bath, electricity & gas line to add kitchenette. There was clearly a kitchen there before it was renovated. We were contemplating the idea of adding back the kitchen and renting it out on AirBNB since it clearly isn’t eligible for long-term traditional rental as it’s not a legal unit; the ceilings are too low (77 inches high) and there’s only one exit (among a few other things).

Would AirBNB be a legitimate option for a unit like this? It seems like others are doing it but I wanted to get feedback about the risks. Since it’s not a legally recognized dwelling unit, would we have to list it as a “Private Room” instead of an “Entire Apartment”? We would want to contain the guests to the basement as the 1st floor would be occupied by tenants.