When Elizabeth Roberts doesn’t feel like putting on her shoes to go to the office, she doesn’t have to. Her commute is just a stroll downstairs.
Roberts, 45, is a Brooklyn, New York-based interior designer who lives and works out her three-floor townhouse. Each day, a staff of six comes to Roberts’s house to work and consult with clients on residential and townhome projects.
Carving out an office in her own residence has created an elegant space that would be difficult to achieve in a more traditional work setting, she said. Plus, as an interior designer, she uses her own kitchen, living areas and bathrooms to show off her skills to potential clients.
It really does feel special and unique. — Elizabeth Roberts
“There’s an Old World feeling from the times when the doctor’s office was in the basement,” she said. “It really does feel special and unique.”
Her choice was partially cost driven; having a home office has allowed her to write off one-third of her home mortgage as a work expense.
It can be tough to emulate Roberts’s combined home and office. Mixed-used properties are tougher to find than residential properties because there are few of them for sale and zoning for such properties is limited in some areas. Costly renovation is often required to ensure the structure complies with building codes. Purchasing the extra space means you’ll also pay more for your home at the outset.
But, there are benefits. Live-work space owners say they are able to write-off certain expenses to reduce their tax burden and enjoy a more flexible schedule. For some, having a unique office space is a draw card for their clients. And, of course, the short commute and reduced overhead of running a business from a separate space (additional rent, utility bills and more) is a major plus.
“There’s a general trend that people are moving away from the classic office space,” said Sebastian Fischer, Berlin-based managing director at Engel Voelker, a real estate company. Entrepreneurs now want to work somewhere that is well-designed, comfortable and feels less like a traditional work environment, he said. Purchasing a mixed-use space is one way to achieve that, he added.
Most buyers turn to real estate agents to find a live-work property since many agents are aware of special considerations and regulations for mixed-use buildings, Fischer said. In Germany, the majority of residential units are zoned to permit commercial use and using a residential unit for work offers tax deductions, he added.
Planning to build an office space in your home? Speak with local insurers about business liability insurance to protect employees who enter the home — and yourself — should an accident occur. Companies including Intasure specialise in insurance for mixed-use properties in parts of Europe.
For professionals who are set on owning a live-work space, the process of working with a real estate agent can take months or even years, depending on requirements. Homes in many cities with lower-floor work spaces, galleries or storefronts can cost the equivalent of $1m to $3m in areas of Europe and North America. They can be difficult to find. In order to meet local zoning laws, many require extra bathrooms or kitchens, additional entrances and strictly divided space to create a commercial environment that is entirely separate from the residential area of the property. Regulations for live-work spaces can vary even by neighbourhood.
In New York, about 75% of residential properties are not zoned for commercial use, but most commercially-zoned properties can be used for residential purposes, said Ivona Perecman, a real estate agent in New York, who specialises in urban lofts. Trendy neighbourhoods such as New York’s Soho and Tribeca were once used primarily for manufacturing, and many of the lofts there are still zoned for mixed-use, she said. Buyers who purchase commercial property need to amend a Certificate of Occupancy in order to convert the building into mixed use. And, they should be prepared to spend hundreds of dollars to get the necessary permits, which vary by property.
Many countries offer tax write-offs for live-work spaces. In the US, a mixed-use space can be viewed as a 1031 tax exchange, which defers capital gains taxes when selling the property. In Germany, homeowners are required to have a separate room to take advantage of annual tax write-offs, Fischer said. Buyers are often required to pay commission fees, which are 2% to 5% in countries such as France, US and Argentina.
Financing a purchase
Surprisingly, financing a live-work space is similar to residential housing and most homeowners get a residential mortgage for their home with 20% down in many countries. Some traditional residential lenders might deny loans for buyers who purchase a space that’s partially zoned for commercial use and in that case, buyers will need to find smaller banks willing to finance the purchase.
If the space needs to be partially converted for commercial use, sometimes a construction loan can be used to cover adding things such as additional exits, bathrooms and kitchen areas to comply with commercial zoning laws.
Insurance for both the home and the business are typically required, especially if there are additional employees or customers on premises. Some home insurers will allow you to add a rider that covers business-related damage. Separate business liability insurance premiums can range from $700 to $2,000 per year in areas of North America. In France, a fee called the Contribution Fonciere des Entreprises for small businesses is often paid in live-work arrangements and can cost up to 2,000 euros ($2,500), according to AFIGEC, an accounting firm based in Levallois, France.
Design and Location
For fur designer Eggert Johannsson, 61, choosing a Reykjavik, Iceland, neighbourhood for his live-work space was a difficult decision, because the shop he planned on the downstairs level required extra build-out and architectural designs.
He purchased the building for 11m kronur ($90,000) in 1986 and estimated it would cost 140m kronur ($1.1m) today, since the area has been developed in the last two decades. Residential real estate prices in Reykjavik have risen by 35% since just 2008, according to research from Icelandic bank Islandsbanki.
Johannsson’s boutique is located in the city’s main commercial area near Laugavegur Street, which helps drive passersby into the store. Johannsson lives alone on the third floor and works with his assistants in the workshop on the second floor. There is a shop on the ground floor.
The space at home also allows Johannsson to keep his hours flexible to accommodate early morning or evening fittings for his international customers, most of whom come into the city for only a few days.
“I have little time to meet with them,” he said. The property was still being built when he found it, which enabled him to customise a welcoming layout for customers, he said.
For interior designer Roberts, working with the property structure to create a separate business entrance from the rest of the home is crucial for businesses with employees. Her employees enter the office area directly from outside and don’t need to walk through the home. To further separate her workspace from her residential space, Roberts installed a sink and refrigerator on the office floor. “I wanted to make sure that people didn’t want to run to the kitchen all the time,” she said.
Architect Tamira Sawatzky who shares a live-work space with her filmmaker husband, Elle Flanders, in downtown Toronto, Canada, said living in a mixed-use building has meant there are more businesses near her home. “We enjoy the street life,” said Sawatzky, who lives walking distance to bakeries and a yoga studio. Sawatzky designed the place to minimise street noise in the residential part of the building. “Weekends can get rowdy in the area.”
The couple purchased the building in 2011 and renovated for a year before moving in. Sawatzky declined to reveal the purchase price. The building is narrow, but the high ceilings still make the space feel open, she said. They committed to the purchase because it’s in the Little Portugal neighbourhood where prices have risen more than 30% in the last ten years. The home is currently for sale for $1.649m ($1.42m) and is one of the only live-work properties for sale in the neighbourhood according to Realosophy, a real estate brokerage firm. A nearby two-bedroom home with a gallery space is on sale for $1m ($860,000).
On the cheap
To get the live-work atmosphere at a lower cost, houses aimed at entrepreneurs are popping up everywhere from San Francisco to Bali.
In Sweden, Hus24 founder Lisa Renander, 32, now offers a five-bedroom home for entrepreneurs who want to live and work in the same place, but can’t afford to purchase property on their own. After an application process, rents cost 3,500 kronor to 9,000 kronor ($470 to $1,200) depending on the room. Since most residents don’t leave the home for work, it can be a “culture shock” once they do, she said. “Sometimes you forget that the world outside is much more closed-minded than in your own environment,” she said.
Sawatzky employs another method to save money. She rents out the third floor of the building for rental income, but declined to say how much she charges. To accommodate the family, the couple’s downstairs studio becomes the dining room come dinnertime.
Written based on an internet feature