But we'd also like to be compensated for this cost especially since we are offering our residents a service. 

@Max Servais if this will be your primary residence, you will need to insure this with a Homeowners policy. 

There are a lot of factors to consider here, but if you can keep your current residence as a rental, I would do that, possibly even a STR or MTR. 

If you are still interested in this property, I would get a qualified, experienced contractor to look at the damage and provide you with a detailed, written repair estimate.

You could have sent him to collections and this would destroy his credit, which could impact his ability to purchase a home, qualify for a car loan, and possibly even cost him his job.

You just have to be able to (obviously) qualify for both properties and you want to do both with the same lender closing on the same day. 

It’s similar to a triplex in that you’re renting three units, however it is a single family residence with an ADU...three leases in place does not change that.

It goes deeper than that.NYC Liberal policies, including strong tenant protections, increases the risk of failure so much that the risk far outweighs the rewards.Financial ruin is just around the corner for the small Mom and Pop Property Investor that it doesn't make sense for them.The Tenants will have free Attorneys that are bent on delaying eviction cases so long that it stretches into years while Mom and Pop suffer from lack of rental income and still have to pay all the bills and do the management.Additionally, the increase in homeless living rough in the streets due to Sanctuary laws causing a lack of shelter beds, then evicting shelter residents after 30 days creating more homelessness, policies that tie up the Police's ability to arrest perpetrators, etc. only causes Mom and Pop to sell out at large discounts to larger Landlords who are capable to use Economies of Scale to eek out a profit.These larger Landlords will eventually turn a much higher profit as the pendulum will eventually swing towards the middle when the NYC Voting population eventually realizes that it's not a conspiracy of the Rich that's causing the Wealth Gap to increase.It's the same liberal laws that encourage people to become lifelong tenants, small Entrepreneurs (including Property Owners and small Mom and Pop Businesses) to be destroyed, and Rents to rise astronomically as housing becomes scarer even when the population declines by as much as 7% in the last several years. 

W2 jobs do NOT qualify you for Real Estate Professional status, even if the job is in real estate! 

You’ll want to check out the PA Code's Chapter 2800 for the standards around licensing, safety, and staffing requirements, and the Assisted Living Residence Regulatory Compliance Guide can provide extra insight.We actually have a local team here in Allentown that has worked on several of these conversions, so if you'd like some guidance or just want to chat through the process, feel free to reach out.