Where do YOU do business?

Question

Am I correct in assuming that most investors do not have a storefront/office space where they conduct business?
            Is it considered not necessary due to "virtual offices" and home-based business practices? Are there even full-time wholesalers that haven't rented/purchased a professional office?

Douglas Christian · Answer

I agree with Chris, if you can get away with having a home business then you are fine.  But, if you deal with rentals and lease options and subject to's like I do, then you need a SEPARATE office and heres why.  They will now come and see where you file these documents that have clients social security numbers and valuable info.  You must have a separate part of your home to store this sensitive info.

Also, if you do meet with clients I do not know about you, but I have found it to be valuable to have clients meet me at my office which is not my home.  I guess from a business perspective that makes sense.

Douglas

Account Closed · Answer

I convinced a local title company to let me use a vacant office and conference room.

Rachel H. · Answer

My office is Starbucks ;)

Mark N.A · Answer

Jenny -- a home office is a legitimate deduction!  Don't give the government any more of your hard-earned money!  If your CPA is cautioning you from taking this deduction he may not be the right CPA for you, or your home office may not meet the simple IRS requirements.

DemosL -- what is this 24-hour clock percentage thing?  My office occupies a tad over 27% of my house and my accountant deducts that percentage from utilities, property taxes, and so forth.

One important point to remember about a home office is that you need to stop deducting it 3 years (I think that's the correct number) before you sell the house or else the IRS will dink you for your previous deductions.

Want to have some fun with your CPA?  Get into a discussion with him or her about the Flat Tax!  Mine almost stroked out trying to convince me that our current system is so much better!

Will Barnard · Answer

I have a home office and just can see spending money on an office location, regarless of tax benefits or not. To me, it is not necessary for our business. If you are a Realtor, then I can see how you need one to invite clients, etc.

As far as home offcie tax deductions, that is certainly an option. As for the rules and amounts, it is highly recommended by me to check with your CPA as I am not one.

Demos Loizides · Answer

I believe another wrinkle to this is a 24 hour clock. You take the percentage of the house you use for business and multiply by the percentage of a 24 hour day that you use the home office or use 168 hours for a week. It makes sense since your home utilities are on 24/7. So what looks like maybe a 10% deduction actually ends up being 2 or 3%. It's almost not enogh to even bother taking in the first place.

Jenny F. · Answer

home office but used to have a satellite office.  I find it easier to work from home and not have data scattered between two places.

i don't write off my home office either because my cpa said its a "red flag".

On the construction side of the business, clients like being here at our home office.  They say it makes it feel "cozier" & they can see our work.

What i DON'T like about the home office is that sometimes its hard to know when to stop working.

Chris Clothier · Answer

It all depends on the type of business you conduct and the image you need to portray.  For simply buying properties, a home office or virtual office is all you would need.  But if you are meeting with clients or other professionals to conduct business, then there is a HUGE advantage to having a conference area as opposed to your kitchen table!
            
            If you never meet anyone - save the money, take the deductions that Alex noted (which are correct) and keep moving forward as an investor.
            
            We moved our business into more upscale offices because we have investors and professionals in our offices everyday and it really has made a big difference as far as image.  Investors now understand that there is more to the company than a bunch of guys who can find cheap deals.

Alex Aronson · Answer

If I am not mistaken (and please check with your tax professional), if you have a space in your house that is only used for your business and only your business, you can take that square footage divide it by the total square footage to get a %.  That % can then be multiplied by your annual utilities, security system, mortgage payment, insurance, and property taxes as expenses that can be charged to the business.

There are some neuances that have to be observed when doing this so check with your tax professional.

2008 is the first business year that I am going to charge these expeneses after hearing about it from my tax professional early last year.

J Scott · Answer

I was only replying to Brandon's post about what the advantages are of having a separate office location...