Obviously you will still need to research if you need permits and if it is allowed.

However, the inspector mentioned that the 2nd and 3rd floors are labeled as "Artist Dwellings," though he wasn’t sure what that fully entails.He suggested applying for a special permit to present the space as artist studios or dwellings, with the hope of eventually converting them into long-term rental (LTR) apartments under that designation.

However, it's technically still not permitted.

Cheap, Easy, no permit. 

Montgomery County has specific requirements on square footage, parking, and permits for ADUs, so you'd want to check those out before making any moves on a basement conversion.If you're just renting out rooms in Montgomery County, you're good to go!

Hotel, motel, and bed and breakfast uses are permitted in multiple zoning districts around the city.

However, I'm receiving pushback from the Revenue Division regarding the issuance of a short-term rental permit.

You need a great commercial agent on your team, a cpa who specializes in land development, a great architect, a surveyor who can do your short plats, a great dirt and underground utility guy, and a great permit specialist. 

The town has always limited the number of permits and has talked about sunseting some of them. 

A single family with permits for 7-8 students may be more profitable than a 3 units with two beds in each unit.