You’ve decided to take the plunge and dive into a home-based business. Working from home can certainly save you time, and money. No more commuting or daily lunch expenses. And since you’re paying your mortgage or rent anyway, you save on physical office costs. Now is the time to take an honest look at your home surroundings to see if it is well-suited to your business. For example, if you are going to be fulfilling online orders, you may need a separate room for organizing and packing these orders that doesn’t encroach on your living space.
If your business is going to cramp your personal life, it may be time to look for a new home that can accommodate both. When you find a suitable one, it’s wise to do some pre-purchase investigation with a thorough inspection from Sherlock Homes Inspection. This will expose any potential surprises that could derail your new business efforts.
Timing could be everything (or at least a lot)
Depending on your current financial situation and how far along your business is, the timing for buying a home at the same time you are starting a business can be a delicate dance. If you are still an employee at another company and working on your new business basics after hours, you may be in a better position qualifying for a mortgage. Generally speaking, it will be less of a hassle if you can show sufficient W-2 based income from your employer than through self-employment, particularly at the beginning stages when you don’t have a few years of tax filings to document your business revenue and stability.
If you have plenty of cash or high net worth, consider a “no-doc mortgage.” With these, you may qualify with nothing but a higher down payment, a good credit score, and several months of bank statements. You are likely to pay more in interest but can try to refinance your mortgage later once your business takes off and provides you with a steady income.
One business tip that could simplify your life is structuring your business as a limited liability company, or LLC. The rules for creating an LLC vary by state, so check your state specifics, but in general, you’ll experience tax advantages with less paperwork and greater flexibility than other corporate structures, while still giving you and your personal assets limited liability. You could pay a lawyer to form the LLC for you, but particularly with home buying goals set in your sights, saving attorney fees by using a corporate formation service is an attractive option.
Whatever approach you take to securing your mortgage, becoming pre-approved before you find your ideal home can put you in a good position of knowing exactly how much home you can afford, and letting a seller know that you are ready to move forward without delay.
From new to ‘new to me’
If you haven’t already done so, put your home “must-haves” down on paper for easy reference in case you find one that “checks all the boxes.” List them in prioritizing order; if you have a list of 10 features, don’t expect to find a home with all 10 – but a home with your top six or seven may work out just fine, or you can modify it later.
One way, of course, to get everything you want and need is to build a custom home according to your specifications. This will take longer, of course, but if you can afford the wait, you are paying only for what you want and need and may save time later by not having to make modifications. In some high-demand markets, this may be your only option.
Or is it? One thing to consider is checking out bank-owned foreclosures. You may be competing with several other buyers, including investors, but if you are successful, you could potentially save several thousand dollars. Find a real estate agent who is knowledgeable about foreclosures. They may even be able to find one prior to the foreclosure sale so you can deal with the seller directly. Expect more paperwork; if you are able to get your mortgage approved from the bank that already owns the home, that might facilitate the process for you.
In many areas, foreclosed homes are in better shape than they were years ago, but since you are buying the home “as is” with no obligation from the seller to fix anything, an inspection is paramount. Your home could have some foundation damage or even water penetration that isn’t obvious from the exterior. If the home needs considerable work but shows a lot of promise for what you and your business need, you may be able to get a rehab loan.
Unlocking your future
Even though starting a business while buying a home will add stress, remember that it is temporary. You’ll feel a sense of accomplishment and promise when you get the keys and unlock the door to your new home and place of business.
Whether it’s a custom-built habitat or one that has seen some better days, having a space to accommodate your business will help you create better days ahead – particularly if you are proactive and include Sherlock Homes Inspection in the process. Call us today at 970-481-7977 or email us at Rick@SherlockHomesCO.com.