I just bought my first rental (6unit) and the new tenant is threatening to not pay rent b/c they dont like to paint color in the stairway.

You may however need to install Fire Doors with a 90 min fire rating within each unit as well as Exit signs, Stair way, and Security lighting in all halls or hallways.

There is also a big crack going up the stairway on the ceiling, almost looking like the house is separating apart.

We placed a kitchen in the smaller unit and sealed off the stairway to make it two full units.

Common areas like stairways don't count against you so a lot more mixed-use retail properties qualify than people think.

Dirt floors, stairways that are so steep that they mimic a ladder, lots of cedar posts - and floor joists. 

The problem with getting a city inspector out to check it out, often they will give you one list, then when the work is completed and they do final inspection, other items suddenly pop up.Download a copy of your city regulations about housing so you know a bedroom has a window and a closet, bathroom has a fan/vent or a window, handrails on all stairways (more than 18" high), how many and location for smoke and c/o detectors, etc. 

The 3rd floor receptacles have no power, nodoors on the bedrooms, loose hand rails on the stairway.

I found a 300 sf basement in a house once with a concrete stairway leading down to it.

(Ceiling in the basement is 2” too low as is to rent as a separate unit and have rezoned)I’ve seen other buildings where they put in a stairway from the within the first floor unit down to the basement as a “mother in law suite” but this adds to the rehab and the rent won’t increase as much as having a 3rd separate unit in The basement.