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As single guy with a regular job, great credit and no debt, I am making an offer on my 1st property which is a 2-level C1-40 zoned building which I will convert to my principal residence/business in the State of Washington. I did the research and it is totally feasible. I will also qualify for the 1st time homebuyers credit!

One floor will be used as my primary residence/musician's workshop. And I will temporarily extend an existing tenant's lease (massage therapist) occupying the other floor although, my plan is to eventually use the whole building as my primary residence/music-recording studio/club while keeping my day job as long as I must.

Question 1: Do I need to establish a business license to continue collecting rent from the current tenant?

Question 2: Can I write off needed renovations(bathroom, kitchen, etc.) as a business expense if I establish my business license now, before purchase?

Question 3: Will I still qualify for the 1st time homebuyers credit?

Question 3: Other than loan interest, what are other tax benefits of owning a commercially zoned property and using it as my residence/business?

Thank you in advance!
A
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You need a lawyer for the legal questions and an accountant for the tax questions. Don't skimp on these essential start-up costs. You'll pay at least double to get out of messes you DIY into.

Phil
Rule Your Retirement Home Fool
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Question 1: Do I need to establish a business license to continue collecting rent from the current tenant?

That's up to your local city/county. You'll have to ask them.

Question 2: Can I write off needed renovations(bathroom, kitchen, etc.) as a business expense if I establish my business license now, before purchase?

The business license is irrelevant for this. Renovations are probably going to be added to your cost of the property. If they're done to the rental portion, you'll recover the cost through depreciation deductions over the next few decades. If they're to the residence portion, there is no current deduction.

Question 3: Will I still qualify for the 1st time homebuyers credit?

Maybe. The type of property and all the other stuff you've posted are irrelevant. To get the first time home buyer's credit, you need to have the property under contract by 4/30/2010 and you need to close and occupy the property as your principal residence by 6/30/2010.

Question 3: Other than loan interest, what are other tax benefits of owning a commercially zoned property and using it as my residence/business?

There's nothing particular about the property being zoned as commercial that is of interest to the tax deductions. Except, perhaps, your ability to legally occupy it as a residence. If that's not a problem, then you simply have to split up the property between the residence portion and the business portion and deduct various expenses accordingly.

--Peter

PS - And, like Phil said, go get some professional advice to get this all set up correctly to begin with.
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