Rob Hanisey is a highly unsuccessful writer who has long overdue bills and rent, and, as flashbacks suggest, has been dumped by his girlfriend Anna.
He - after the suicide of the previous tenant, Terry - is accepted to the Highberger House which, according to its supervisor Nancy Bloom , was bought by a rich philanthropist in the 1930s, to provide rent-free accommodation for unpublished writers, but strictly only until their first book gets published.
In the House, Rob experiences strange and gradually more close encounters with a beautiful girl, Valerie, who asks for his help. At the beginning, Rob assumes she's a ghost. The other tenants - especially Patricia Dunbar - are annoyed with him and the noise he makes when chasing Valerie the ghost. Only Bruce Sweetland remains friendly, seemingly not making a big deal out of this strange acclimatization.
Valerie keeps visiting Rob, asking for his help to save her from The Beast, but is violently captured and taken seemingly inside a wall by dark, supernatural being before she can explain who she is and what is going on. This results in more and more intense episodes of him ending up yelling at the wall, which makes the other tenants more and more angry, except for Bruce and the old Everett Neely. Everett follows these outbursts with amusement and resignation, while Bruce tells Rob he should not care about what the others say.
One of Rob's outburst becomes so loud that Nancy warns him: next time, he is going to be out of the Highberger House. Afterwards Bruce invites him to his room to grab a couple of beers. They talk about the existence of Valerie, which Bruce finds funny. While Bruce looks for beer in the fridge, Rob discovers on the table a manuscript titled "Valerie on the Stairs" written by Bruce, Patricia and Everett. This discovery infuriates Bruce, and he attacks Rob in the room.
Not much later Valerie appears in Bruce's room, who is stunned by the fact that she is alive, and assumes that she is there to express her love towards him. Valerie tells an unseen being to "take him and be done with it", however and the Beast appears from the shadows and rips Bruce's spine out through his mouth. Rob visits Everett in his room, who advises him to leave and forget about writing. Rob discovers an old movie poster (seemingly from the 1950s) depicting the Beast. The movie was adapted from the novel of Neil Everest which turns out to be Everett's real name. Rob confronts him, but he denies the existence of the Beast and Valerie, claiming it is only Rob's imagination.
After discovering Bruce's body, Rob is sure that Valerie and The Beast are the creation of Bruce, Patricia and Everett, and they came alive. The two remaining members of the writing trio deny this again, and Patricia storms off to pack up and leave the House. Patricia packs in a hurry, and apparently very nervously, when Valerie appears to ask for a last kiss. It turns out that Patricia created Valerie as a love-ideal for her.
After a couple of kisses, when Patricia thinks they can live on happily together with Valerie, Valerie asks her why she let her be punished over and over. The Beast grabs her from behind, rips her chest open and the two leave her to bleed to death.
The noise attracts Rob and Everett, who break into her room to find her dying in front of them. After a heated argument Everett confesses that they wrote the whole story together, and they just couldn't stop continuing with the tortures and the horror (which was Bruce's speciality).
Rob breaks a hole in the wall and asks Everett what is behind there. Everett admits it is The Beast's torture chamber and they fed a lot of misfortunate girls to him, although they did not know that The Beast indeed grabbed those girls. After his amazement over how the fiction became reality, he starts to suspect - which rapidly grows into a conviction - that Rob must be indeed Bruce's creation on his last pages which he has not yet read. Rob does not believe this and they enter the chamber.
On the way down the stairs, the bodies and skeletons of the girls lured into the chamber are hanging from the walls. One of them is Anna, Rob's ex-girlfriend, who bites off a piece of Everett's neck causing him to die. At the bottom of the chamber, Rob finds The Beast and after some words they fight for Valerie. Rob pushes him into the fire and The Beast dies.
Valerie and Rob start to run upstairs, although Valerie does not want to go, claiming they cannot do so. The stairs lead to the building's roof access, where Rob forces Valerie out into the open against her will, and when she gets to the roof she vaporizes. The police arrive in the alley and they order Rob to surrender. Rob watches in horror as his skin turns white with a lot of typewritten words on it. A sentence in the middle of his palm says "Rob has failed...".
He watches himself in disbelief as his body transforms in to typewritten pages which are blown away by the wind. The last one flies into the camera and says: "And so it came to pass that Rob Hanisey never became a published author."