Is A Live/Work Space (and its Mortgage) The Right Fit For You?

In the last ten years, the way we work has changed dramatically—and in turn, so have our workspaces. Due mostly to the Digital Revolution, today record numbers of people are working from home; and self-employment has led to increased independence about how and where many of us wish to work. This shift has not only changed the way we look at our homes—it has changed the way our homes look.

A potential buyers’ “wish list” was probably a lot different ten years ago than it is today. While at one time extra closet space or a guest room may have been a priority, today that same person is much more likely to put a functional working space at the top of their list. If you fall into the category of working from home however, you need more than a casual home office but an operational space from which you can conduct your daily business. But before you charge ahead, there are a number of things to consider when deciding whether or not a live/work space is right for you.

If you don’t know what actually constitutes a live/work space, you’re not alone. Here in Vancouver, a building must follow specific bylaw requirements to be granted live/work status. Buildings that fall under this umbrella definition must be designed for both purposes—living and working—and should not aversely affect the quality of life for other residents. Traditionally, lofts were often seen as the most desirable type of live/work properties, although that too, is changing. Particularly in East Vancouver, at one time the majority of those looking for these types of dwellings were artists who needed space to create large projects, or have a workshop or showroom with adequate space to exhibit their work. Today things have evolved; those who want a storefront for their business, or a place where clients can visit their office now often desire this type of space. Not to mention the enormous demographic of people who have specialized services (catering, tailoring, party planning, childcare).

One obstacle live/work homes can present is that they are typically zoned differently, which can lead to challenges in obtaining residential financing for buyers. Live/work buildings in Vancouver fall into a variety of zoning types—from small commercial establishments such as retail stores (C-1 Commercial District) to more specialized services and/or light manufacturing (C3A Commercial District). Before making any kind of decision on a live/work property, it’s imperative to speak with your mortgage broker who can guide you through what type of space meets the requirements for the kind of business you have or hope to open.

Once you’ve figured out what type of live/work space suits your specific work needs and what zoning definition your space falls into, it’s time to look into financing. Most residential lenders will only lend on purely residentially zoned properties. Financing a live/work space may be challenging. Some lenders will look at financing these properties only with an insurer’s approval. Typically, CMHC and comparable agencies will only insure a home that has no more than 25% of its floor space designated as workspace upon agreement of purchase and sale. If you need more than that for your business, you may be forced to look into commercial real estate and obtaining a commercial mortgage, which may prove to be more pricey and also require a larger down payment.

For many running a home-based business, tax deductions represent one of the most attractive benefits of owning a live/work space. Although there are also write-offs available while renting, owning a live/work property can often increase these significantly. Home office deductions can include a portion of one’s maintenance and repairs, utilities, as well as property taxes and mortgage interest costs (not including that which is a repayment of principal). Those who are self-employed will have significantly more tax write-offs available to them than those who are employees. If you both live and run a business from your residence, you are usually able to write off 70% of the space as commercial. As an extra bonus, often these tax write-offs represent a significant enough amount that owners can use it towards paying their mortgage.

One last thing to stress for those purchasing a live/work residence is to find out whether or not the tax has been paid on the property. Those who have a business with a GST number can defer the tax; conversely, if you do not have a GST number you will have to pay the GST amount on the value of the current property.

Buying any property represents a significant investment and is, for many people, the largest purchase they will ever make. Being knowledgeable about what kind of live/work space is right for you, together with a realistic 5-10 year business plan is crucial in making a good decision. Looking at factors such as family planning and your business’s potential for growth today will help to ensure you choose wisely for tomorrow.

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About Atrina Kouroshnia

Atrina Kouroshnia is an independent, licensed, mortgage broker in the province of British Columbia. She has a degree in Human Relations & Commerce, and past work experiences in HR & Real Estate Development. She comes to the table with great customer service and problem-solving skills. Her approach to finding the best mortgage solution involves both short and long-term planning, making sure her clients are in a suitable mortgage that is flexible to their needs.