There were clients that I interviewed, but didn't have space for, so they've gone with someone doing just what you're talking about to bridge the gap. She's got a full apartment just for the daycare...above a restaurant I think. I'm assuming it's legal and can't imagine why it wouldn't be so long as you adhere to CCEYA regulations. I'm not sure how much profit there would be considering rent, insurance, etc, though. Most of us do it in our homes to cut out extra overhead. This isn't really a moneymaking business. But if you've figured it out so it works for you, that's great!