As an entrepreneur, you may have considered purchasing a property through your business. But what if you also want to live in the property? Can you do that? The answer is yes, but there are a few things to keep in mind.
First and foremost, it’s crucial to understand the legal and financial implications of buying a property through your business and using it as your primary residence. You’ll need to consider the tax implications, financing options, and potential risks.
If you’re considering buying a property through your business and living in it, there are a few financing options to consider:
- Commercial Loan: You can apply for a commercial loan to purchase the property through your business. However, commercial loans typically come with higher interest rates and require a larger down payment.
- Residential Loan: If you plan to live in the property and use it as your primary residence, you could apply for a residential loan. But keep in mind that if the property is owned by your business, you may have difficulty qualifying for a residential loan.
- Mixed-Use Loan: A mixed-use loan is an option if the property has both residential and commercial space. This type of loan allows you to finance the property through your business and live in the residential portion.
There are a few tax implications to consider when buying a property through your business and living in it:
- Deductible Expenses: You can deduct certain expenses related to the property, such as mortgage interest, property taxes, and maintenance costs, as business expenses.
- Personal Use: If you’re using the property as your primary residence, you’ll need to determine the percentage of the property that’s used for personal use and the percentage that’s used for business purposes. Only the business-use portion of the property can be deducted as a business expense.
- Capital Gains Tax: When you eventually sell the property, you’ll be subject to capital gains tax. If the property is owned by your business, the tax rate may be higher than if you owned the property personally.
Buying a property through your business and living in it can also come with some potential risks:
- Personal Liability: If the property is owned by your business and someone is injured on the property, you could be personally liable for any damages.
- Difficulty Selling: It may be more difficult to sell the property if it’s owned by your business, as potential buyers may be hesitant to take on the business ownership.
- Business Risk: If your business experiences financial difficulties, the property may be at risk of foreclosure or other legal action.
Buying a property through your business and living in it can be a viable option, but it’s important to consider all the legal and financial implications before making a decision. Be sure to consult with a financial advisor or attorney to determine the best course of action for your unique situation.