Fire marshal wants a second exit on an eight room house with one kitchen

Question

I'm under contract on a 1920s house that's been rented by the room for years without a license. Six bedrooms upstairs, two down, one kitchen, two full baths. Gross on the rent roll is about $5,600 a month, which is roughly double what the whole house would fetch as a single-family rental in that neighborhood.

The problem is that the rent roll only exists because nobody has ever pulled a permit. When I called the city to ask about the rooming house license, the plans examiner said any licensed operation over a certain occupant count needs a second means of egress from the second floor plus hardwired interconnected smoke detection throughout, and probably a 1-hour separation at the stair. My contractor's rough number for exterior stair, framing, and the detection work is $70k to $95k depending on whether the stair can land on the existing side yard setback.

So the deal only pencils if the license comes through, and the license only comes through after I spend the $70k+. Seller won't extend the inspection period past three weeks and won't credit anything.

How do people actually sequence this? Is there any mechanism to get a determination in writing before closing, or does everybody who does this just buy the risk?

Rena Expert · Accepted Answer

The mechanism you want is a written zoning and code determination, and whether you can get one before closing depends entirely on your municipality. Some jurisdictions will issue a zoning verification letter naming the permitted use for the parcel, and some will do a pre-application code review where the building official comments on a concept set. Others will tell you nothing until an application is filed by the owner of record, which is the wall most buyers hit. Call the permit counter and ask which of those three they are, in those words, before you spend anything on drawings.

Where you can't get the letter, the usual sequence is to buy the determination risk down rather than eliminate it. That looks like a longer feasibility period with a small nonrefundable deposit, or an assignable contract, or seller cooperation as owner of record on a permit application with you paying the fees. Sellers who have been operating unlicensed for years often refuse the last one, because the application itself puts the existing use in front of the city.

On your numbers, the thing that concerns me more than the $70k is that $5,600 rent roll. Unlicensed room rentals at eight residents almost always come with rents set by what the current tenants tolerate, not by what a licensed, code-compliant, inspected house commands. If the license lands and the city caps occupancy at six, you lose two rooms and the stair still costs the same. Run the deal at six rooms and at your contractor's high number and see whether you'd still sign.

Also confirm in writing what happens to the sitting tenants when the use goes through licensing. Some jurisdictions treat a change in licensed occupancy as grounds requiring relocation notice, and the rules differ by state and often by city. That's a question for a local land use attorney, not a permit clerk.

karen_whitfield · Answer

The three-week inspection period is the whole problem. I've never seen a zoning verification letter come back in under a month in any county I've dealt with, and that's when the file is clean. A house with an undisclosed rooming use is not a clean file.

kevin_lombard · Answer

Sorry to slow the thread down, but what makes this a boarding house rather than eight roommates? The rooms are individually leased, is that the line? I'm trying to work out where a plain house share ends and the licensed thing starts.

carlos_nunez · Answer

@juniper it's individual leases plus the occupant count plus whether the operator provides anything, meals, cleaning, linens. Cross a local threshold on any of those and you're in a different code chapter with a different licensing path. The threshold number is different in every city I've looked at, sometimes 3 unrelated adults, sometimes 5.

@anchor on your actual question, the exterior stair number worries me less than the setback. If it can't land in the side yard you need a variance, and a variance hearing is where the neighbors show up to talk about a rooming house. That's a six month detour with no guaranteed ending.

nicole_adeyemi · Answer

Pull the zoning district text yourself before you call anyone. Half the time "rooming house" or "boarding house" is a listed conditional use in the district, which tells you immediately that you're headed to a public hearing regardless of the stair. If it's listed as permitted by right, you're in a much better position and the stair is just money.

renee_dubois · Answer

What are the sitting tenants paying individually? That's the first number I'd chase down. Eight rooms at $700 average sounds tidy on a spreadsheet, but in a house with one kitchen and two baths I'd expect a fair bit of that to be month to month with people who leave when the inspections start. Turnover on eight rooms is a different animal from turnover on a fourplex.

tylerbrooks9 · Answer

Genuine question, why is anyone buying this one? You're paying for a rent roll you can't legally keep and then spending $90k for permission to maybe keep most of it.

paulgrant17 · Answer

@verity because double the single-family rent is real money if it survives. But @anchor, on screening eight rooms in a shared-bath house, you're effectively underwriting every resident against every other resident. One person who doesn't clean up costs you the other seven. Whatever your process is on a normal rental, this needs a tighter one and it needs to happen eight times a year, not once.

marcus_hale41 · Answer

The piece I'd nail down is insurance. A carrier writing a single-family dwelling policy and a carrier writing a licensed rooming house with eight unrelated occupants are usually not the same carrier, and the second quote can land several times the first. Get that number during the three weeks. It's fast to obtain and it's the one line item people leave out of these underwrites entirely.

Also ask the lender whether their appraiser will treat it as residential or commercial. Eight rooms with individual leases sometimes flips the loan into a different product with a shorter amortization and that alone can eat the spread you're buying.

brandonlee36 · Answer

What breaks in these at scale is the shared kitchen. Two baths for eight I can just about live with. One kitchen for eight adults who all cook at 6pm means a fridge full of other people's food, and every complaint call is about that. I ended up putting a mini fridge in each room in a much smaller version of this and it was the best money I spent, maybe $150 a room plus the electrical.

None of which helps your egress problem. I'd walk unless the seller extends.

Fire marshal wants a second exit on an eight room house with one kitchen

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