People buy homes for the bedrooms, real estate agents say, but having a designated space for a home office may make all the difference in a tight sales market.
“It’s definitely a selling point,” says Lisa Petersen, an associate broker with Coldwell Banker. “It’s almost imperative.”
In neighborhoods where homes average $250,000, Petersen estimates a designated home office can add as much as $10,000 to the price point.
For higher-priced properties – those with a selling price of $500,000 or more – potential buyers open the door with the expectation of seeing a library, office or both inside.
“If a home in the price range doesn’t have an office, it will probably be the last house to sell,” Petersen says.
Fueling this drive is a surge in both the number of home-based businesses and an increase in those businesses’ overall profitability.
There are more than 13 million home-based businesses in the U.S., according to the Small Business Administration. And they aren’t restricted to day care or low-budget operations.
A 2006 SBA report found that home-based businesses generated average receipts of $62,523 and consistently posted a higher return on revenues (36 percent compared with 21 percent) than their non-home-based business counterparts.
What happens as a result, says Lester Crawford, broker/owner of Azure Realty, is that professional couples have very specific ideas of what they’ll accept.
“Homes have really transitioned into formal office space,” Crawford says. “When professional couples are in the market to buy, they’re looking for office space for two.”
Zoning rules vary. In Denver, for example, there are limits on the type of business that can be operated from a home and the impact that business can have on surrounding residences. Always check the appropriate zoning regulations before opening for business.
The city charges $20 for home-based-business permits.
“The Denver zoning code refers to home-based businesses as home occupations. They’re limited to maintain the residential character of residentially zoned properties,” says Julius Zsako, communications director for Denver Community Planning and Development.
Interior designer Kathleen Casteel has operated her business, JFC Interiors, for 20 years. Her 116-year-old, four-bedroom, three-bath home in northeast Denver’s Skyland neighborhood has 831 square feet of designated office space.
Casteel researched the zoning code and learned her neighborhood is classified as R-2: “multi-unit dwellings, low-density.” Home-based businesses are allowed by permit.
“I use the entire rear of the house, which was once a unit, for my business,” Casteel says. “I’ve never had any negative feedback from clients about my business being operated from my home. Once they see the workroom, the drafting table, the computer station, they see it’s a working office.”
In addition to learning about zoning requirements, home-based business owners need to become fully versed in the intricacies of tax rules.
Owners can deduct part of their real estate taxes, mortgage interest, rent, utilities, insurance, depreciation and certain other expenses – but only those that equate to the portion of the home designated (i.e., used “exclusively and regularly”) as a place of business. Jean Carl, spokesperson for the IRS, recommends downloading Publication 587 (Business Use of Your Home) from the IRS website to get details.
Once that process is complete, understanding state income tax rules is relatively easy, as many of the same rules apply.
Carleen Brice wrote two books, edited an anthology and launched a website and the “Pajama Gardner” blog while working in an office culled from a 120-square-foot second bedroom in her 1,200-square-foot Park Hill home.
As a writer, her work doesn’t impact the residential quality of the neighborhood. Even so, she quickly discovered that starting and running a business – even from home – requires time, patience and a lot of research.
“I didn’t do it all at once,” Brice says. “It’s kind of a rocky process. There’s a lot of hidden information. I thought I had all of the information I needed. Then … there was something new.”
Check it out
Before hanging a shingle in your front window, real estate agents and government officials advise business owners to check IRS guidelines, which can be found at .
The official website for your city or town will most likely offer specific information about zoning regulations and permits.
