You've been thinking of starting a home business for a few years now, and the time is finally right. However, you're
looking around and realizing your house lacks the space needed to bring your vision to life. Should you start your business now and upsize later or sell your house before starting a business? This might seem like a matter of convenience, but there's a practical reason to relocate before starting a home-based business: It's harder to qualify for a mortgage when you're self-employed. From the local experts at Coastal Island Properties, here's what you need to know about buying a home while starting a business.
Self-employment and home loans
Sole proprietorships, partnerships, and limited liability companies are the most common business legal structures. These business entities offer pass-through taxation and uncomplicated filing requirements. LLCs have the added benefit of protecting business owners from personal liability, making the additional steps to form an LLC well worth the effort — especially when you consider how easy it is in most states.
However, since owners of these business entities aren't paid a regular wage, banks are often wary to lend to them. As a result, you'll have to work harder to prove your creditworthiness as a self-employed homebuyer. This generally includes providing two years of tax returns demonstrating your business's income and financial stability.
For startups without a track record, that’s not possible. For that reason, it's wise to buy a home before quitting your day job. Once you're settled into a new home, you can start making a plan to transition to full-time business ownership.
The only exception is if you're recently unemployed and looking to self-employment as a path forward. In this case, you can qualify for a smaller mortgage based solely on a spouse's income or focus on building your business before buying a home.
What to look for in a house for home-based business
When buying a home where you can live and work, you want an office that's architecturally separate from the rest of the house. This creates privacy, professionalism, and a clear boundary between work and family time.
Homes with detached additions are the best candidates. This could be a fully-equipped accessory dwelling unit, outbuilding or workshop, converted garage, or room over the garage.
Attached additions are another excellent option. This can be a converted space like a basement, attic, or garage, a bump-out addition, or a sunroom. Homes with dual master suites are also easily adapted to business use, particularly if the converted suite has its own private entrance.
Other considerations when buying a home for business use include:
- Location: Does your home business abide by neighborhood zoning ordinances or HOA covenants? Is it easy for clients, vendors, and employees to access?
- Connectivity: Most home businesses rely on the internet to run their business. Familiarize yourself with the service providers and speeds available in your location.
- Storage: Does your business require storage for materials or inventory? Consider how much storage you need and whether it requires climate-control.
- Family life: Work-life balance calls for more than a fully-equipped home office. Make sure the home you choose includes amenities that improve family life as well, like an updated kitchen, big backyard, and family-friendly neighborhood.
Finding a house that does it all can be tricky. When you have high expectations for your next home, contact Coastal Island Properties. Whether you're after a central location, a big lot, or your own waterfront sanctuary, agent Desiree Maurer can help you find what you're looking for in the Charleston tri-county real estate market. Search for your next home at Coastal Island Properties or call us today at 843-327-9010.