What to Know About Buying a House for Your Home Business
Now that you’re running a business from home, your dream home is taking a different shape. No longer do you drool over in-ground pools and gourmet kitchens. These days, your fantasies revolve around a home office and plenty of storage for all of your business supplies.
John Martelotti of Keller Williams Realty can help you find the perfect property for your home-based business. However, there are a few things you need to take care of before entering the housing market. From financing your home purchase to outfitting your new home office, here’s everything you need to know about buying a house for a home-based business.
Getting a home loan as an entrepreneur
Qualifying for a mortgage is more complicated when you don’t work a traditional job. Lenders consider both income and business stability when assessing a self-employed borrower’s creditworthiness. Proving that worthiness requires documentation including two years of business and personal tax returns, bank statements, and a list of debts and expenses.
This can prove difficult for newly self-employed borrowers who don’t have a history of consistent and increasing business income. While some lenders will make an exception for borrowers with less than two years of self-employment income, new entrepreneurs should consider purchasing property before launching their business. Starting your business after buying a home also lets you tap equity to finance a business idea.
Running your home business legally
Your lender isn’t the only entity you need to sell on your home-based business idea. Home-based businesses also need to abide by zoning restrictions, permit and license requirements, and other federal, state, and local laws.
While not legally required, home business owners should also consider incorporating their business. Incorporating protects personal assets (like your house) from business debts and liabilities. If you’re worried that incorporating involves complicated paperwork and meetings, know that an LLC is actually quite simple to create. All you need to form an LLC in most states is articles of organization, an operating agreement, and filing fees. It’s easy enough that many entrepreneurs file LLC paperwork themselves using formation services that walk them through the process.
Deducting home office expenses and improvements
Once you buy your home, you’ll inevitably want to redo the home office to make it yours. Whether that’s installing an exterior entrance, designing custom built-ins, or adding more natural lighting, be sure to keep meticulous records of home office improvements. Home office expenses are tax-deductible and can add up to hefty tax savings if you use the actual expense deduction.
This tax deduction is also why it’s important to have a home office that’s separate from the rest of your house. In addition to being good for professionalism and productivity, a dedicated home office makes it easier to prove exclusive and regular use in order to qualify for the home office tax deduction.
Tips for viewing homes during COVID-19
The COVID-19 pandemic has complicated the home-buying process for many buyers. Not only is there stiff competition for properties with home offices now that countless people are working remotely, but social distancing requirements have limited open houses and walkthroughs during the pandemic.
In addition to the usual etiquette like removing shoes and leaving pets at home in case of allergies or other animals, buyers should prepare to be flexible when viewing homes during the pandemic. Some sellers may prefer 3D walkthroughs or live video chat tours for the initial viewing or limit the number of people who attend a walkthrough. Communicate with your agent so you understand expectations for viewings and stay abreast of changes in the coronavirus housing market.
Running a business out of your home is a smart move as an entrepreneur. Not only do you get the convenience and flexibility of working from home, but home-based businesses save big on overhead costs. However, finding a home that’s ideal for family and business is harder than it seems. For help finding your next property, contact John Martelotti today!