I'm the owner of a duplex in Uptown Minneapolis, wondering the best way to rent out a new space. I recently renovated the attic into additional living area, changing the 3BD 1BA second-floor unit into a 4BD 2BA unit across the second and third floors. I envisioned the new space as a master suite if it is rented to a single family. However, I have good tenants on the second floor, and wanted to explore options to rent out the third floor independently. **Any thoughts on the options below?**
Relevant information:
- Third floor cannot be a permitted separate unit--there is only one entrance/exit stairway (MPLS requires two), and no sprinkler system (which would allow us just one exit)
- Third floor electric and gas can be measured separately, but all are under the same bill
- By rekeying two doors, there could be completely separate access to the second and third floors
- Current second-floor rent is $2000
Option 1: End Lease and Rent as a Full Unit
This is the most straightforward option. I could end the lease with my current tenants, and find a family or group that would like a 4 BD 2 BA unit. It would function well, but I am concerned about (1) finding the right tenants, as always, and (2) whether the incremental revenue of the new space will help pay off the renovation. In Uptown, a 4 BD 2 BA house might rent for $2500-2900 depending on quality. Certainly less than two independent spaces (the third floor could be $1200 on its own).
Option 2: Long-Term Rental of Third Floor (Separate from Second Floor)
I've been wondering if there is a way to rent the third floor separately that would be safe and legal. While the third floor doesn't have a kitchen (not legal), we could easily provide a kitchenette space for a toaster oven/hot plate/microwave that could be enough for many folks. Essentially, the second and third floors could be independent living areas. Could I have two leases for the same unit? Or alternatively, I could say to my second floor tenants that I need to expand the lease to cover the third floor, but offer to find a sub-lessee who would take on the third floor space and operate completely independently from them, and split utilities according to usage?
Option 3: Mid-Term Rental of Third Floor (e.g. Traveling Nurse Program)
Like Option 2, except maybe different regulations apply? I could find a sublessee for my second-floor tenants using this program, who would stay between 1 and 3 months. The kitchenette system would work even better in this situation, and I have the furniture to make the space fully furnished for this sort of rental.
Option 4: Airbnb
Could be lucrative, but also a hassle. I know that Minneapolis has new regulations about short-term rentals, so that any separate unit has to be permitted separately. But I could also list as a "separate room" within the unit, but clarify that it is completely separate in the listing. I don't know if this follows guidelines or not.
Thanks in advance for the thoughts. Might just be time for a real estate lawyer...
