Things to Remember as You Buy a House and Start a Home Business
Mar 11, 2022
Things to Remember as You Buy a House and Start a Home Business
A huge chunk of new businesses are started each year from people’s homes. If you’ve decided that entrepreneurship is right for you, but you’re currently living in cramped quarters, it’s time to consider buying a new home. Making both of these transitions at once is a huge undertaking.
Starboard Commercial Real Estate is pleased to share a bit of insight for home-based entrepreneurs on steps to take when moving and starting a business happen at the same time.
Draft a business plan.
According to the California Secretary of State, the first step toward starting a business in California is to write a business plan. This document helps you get your thoughts on paper, creates a roadmap for your business to success, and shows potential future investors that you’re serious about your (and their) success. You can write a draft just with a pen and piece of paper, and then outsource a professional service to review your business plan. This is a great option if this is your first business and you need an objective outside opinion.
Legalize your business.
Once you have decided on your business, it’s time to form a business structure. While you don’t have to integrate as an LLC or corporation, it’s almost always in your best interest to do so. Forming an LLC is usually a good first step for small businesses. However, if you have big plans, think that you will scale in the future, and want to attract investors, then setting up as a corporation is wise. Keep in mind that your business structure limits your personal liability while also directing how you pay taxes and handle your management structure. Fortunately, as complicated as it might sound, you can use an online formation service to research and establish your corporation or LLC. Do keep in mind that laws vary from state to state, so make sure to use a reputable service that has done the research for you.
Research local zoning laws.
Each county and city have unique rules and regulations regarding how residential properties can be used. Depending on where you live, you may have to navigate cautiously to form your business in a way so that you do not violate zoning laws. Keep in mind that there are many restrictions no matter where you live. As a general rule, as long as your work is done completely online, you should not be prohibited from running a business. You might not be allowed to have signage, and there will likely be rules in place that reduce the number of individuals coming in and out of your home.
Consider your office space.
Whether you plan to buy with lots of room or you’ll be limited on office space, make sure that you buy with your office in mind. If possible, look for a home with flex space, such as a dedicated office or dining room that you can use during business hours. Your goal is to keep your work as far away from your family as possible. If you make products, such as T-shirts or crafts, you’ll also need a spot to store your raw materials. This could be an extra-large garage or separate storage building on your property.
Get your finances in order.
If you have yet to quit your job to start your own business, it’s probably not the time to do that. This is because your lenders will expect to see an income history before you can qualify for a loan. This does not mean that you can’t start your business, only that it might be in your best interest to start part-time while you navigate the financial aspects of making a home purchase. You’ll likely need a credit score of at least 620 to qualify for a conventional loan. Rocket Mortgage notes that a credit score of 720 or higher will result in a lower down payment. You’ll also need at least 3.5% of your purchase price available in cash for your down payment and/or closing cost.
Set a budget, and stick with it.
When you’re buying a home and starting a business, you already know that you’re going to spend money and lots of it. But, it’s crucial that you set a home-buying budget, and stick to it. Take a moment to sit down and determine how much money you have coming in, how much you have going out, and how much you expect to be paying each month once you move into your new home. Having these numbers in front of you will keep you from overextending yourself financially. The Be The Budget blog also explains that budgeting is important in your relationships and can help you get out of debt if you’ve experienced prior setbacks.
Talk to your family about separating work and home.
Another thing to keep in mind as you buy a home and start a business is that you need to discuss with your family what this might look like. If you have children that are already used to you working outside of the home, making this transition can be a huge adjustment for everyone. They will be in the mindset that when you are home, you are home. Everyone in your family must understand and respect your working hours and space.
Both buying a home and starting a business are huge life events. And, they can each cause stress in their own right. When you’re doing them at the same time, it’s in everyone’s best interest that you take preemptive steps early on to reduce the strain of each. Those tips listed above are just a few. One final piece of advice: hire a real estate professional that understands your needs. They will take a huge chunk of the burden off of you so that you can find your home, move, and get started living your new life with fewer hiccups along the way.
Are you looking for commercial investment? Hans Hansson of Starboard Commercial Real Estate has professionals that can help you find it and then work with you throughout the selling or leasing process.
Written by Marcus Lansky
Image via Pexels
