"I dont like the (insert item)" flipper tries to accommodate and changes "x" and the "buyer" flakes.

And I had rented my SFR to 3 room mates before, but my driveway can park four cars, and being a corner lot, accommodate 5 more.

Andy,Unless a project is straight forward  I will always go to the building dept with a list of questions, our building dept is always more than accommodating and takes the time needed to answer all questions.Explain to them what you are intending to do and you will be guided to the correct information.You will not be forced to convert the property.In our jurisdiction you would need to sub everything and depending on how many projects you are doing a year may need a contractors license.

While not a lender myself, nor an attorney, I can say that many of my former CRE industrial clients have bought buildings that they originally occupied 51% or more and then either bought another larger building to accommodate growth or reduced in size or went out of business and leased the entire building(s) out to tenants.I think the occupancy rule is in place to discourage investors from accessing SBA loans for the simple privilege of using these funds for speculative real estate investment.

STR's can charge a significant rate when a SFR is large and can accommodate for large amount of people whereas STR tenants prefer privacy and usually travel individually or in pairs so 2 bedroom properties work really well for them.

Saw you post from last year - I know of a very upscale Bed & Breakfast that is expanding, due its' demand for accommodation, expanding restaurant hours and it being a number one draw for wedding venues and mansion buyouts. 

They have been very accommodating to my requests thus far and are not pushing a quick sale. 

I tried to build Modern Water-view Townhouses on Fort Harrison and Cedar Corner but due to city upgrading density plans this area may accommodate a mid-rise Condominium with retail on the first floor or just a 30-50 room Hotel.

Sandra:The regulations governing commercial leases are considerable different, and usually less restrictive on the landlord, than for residential accommodation.  

If you take the time to articulate to the seller that you intend to convert the POHs to TOHs and therefore all that income will be going away, the seller may see your point and accommodate you with a lower price.