I was looking to pivot to renting by the room and take away excess living space in favor of more "units" (for lack of a better term) when an investor brought up the potential of running into "brothel laws" which are most commonly spoken in reference sorority houses and with x-amount of unrelated women living together to fall into this classification. 

In general, the ones to avoid are the ones that: Don't allow financing or a finance contingency (it can be a good indication they are selling above market value) Don't allow for your own independent property inspection Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors) Require you to pay for any renovation upfront Sell only in cheap. low end neighborhoods Don't accurately represent the neighborhood/property classification Don't have consistent rehab standards for all properties Don't provide a scope of work for the property Can't provide references of repeat investors Require you to close before a tenant is in placeFeel free to contact me if you'd like any help.

I've pushed through it however and as Eric mentions people have pushed through in Chicago as there are projects that have been completed.Also the point on classification of the structure, this may also be an areas that can be resolved with education of the council/bank/others that you are talking to.

My lender is saying the loan will not work because of the classification on my first townhome. 

In general, the ones to avoid are the ones that: Don't allow financing or a finance contingency (it can be a good indication they are selling above market value) Don't allow for your own independent property inspection Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors) Require you to pay for any renovation upfront Sell only in cheap. low end neighborhoods Don't accurately represent the neighborhood/property classification Don't have consistent rehab standards for all properties Don't provide a scope of work for the property Can't provide references of repeat investors Require you to close before a tenant is in placeFeel free to reach out if you want anymore insight.

You simply have to deal belly-to-belly with your tenants in this property class if you don't want to make your life hell.

It also depends on the current market for that class. If

I've heard a  lot of horror stories about other turn key companies from our clients and there are always recurring themes but in general, the ones to avoid are the ones that: Don't allow financing or a finance contingency (it can be a good indication they are selling above market value) Don't allow for your own independent property inspection Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors) Require you to pay for any renovation upfront Sell only in cheap. low end neighborhoods Don't accurately represent the neighborhood/property classification Don't have consistent rehab standards for all properties Don't provide a scope of work for the property Can't provide references of repeat investors Require you to close before a tenant is in place

So in essence I think it is a classification error, you base your property's sale price on other sales in your market, however a percentage of the price of these other sales is due to considerations that your property simply does not have. 

So they need to look at the classification for each area on the map, many areas are controlled.