What are some issues I might encounter in purchasing a loft for use as live/work space?
Many lofts in New York are former commercial buildings that have been converted into residential space. Because most lofts were not originally designed as residential space, the buildings in which they are found rarely have doormen or concierges (despite what you may have seen on "Friends" or any other TV show). As large, open spaces that usually spread over a minimum of 1000 square feet, lofts are most prominent in the downtown area, particularly in Soho. They often feature high ceilings and/or columns in a wide variety of architectural styles.
There are some restrictions that may apply to those wishing to live and/or work in lofts in New York. Certain loft spaces have been set aside by the city as lower-cost housing for people making a living as artists. Prospective buyers for these apartments must be certified by the city as AIR (Artists-in-Residence). Also, some co-op buildings with loft spaces may not permit businesses, because of the safety concerns raised by high traffic of non-residents in and out of the building.
The best areas to find these lofts in Manhattan are the Village, Meat Packing District, Soho, Tribeca, Nolita, Noho and the Flatiron District. Chelsea and the Garment District are the newest up-and-coming locations with developments and conversions featuring such apartments. Once you've nailed down the areas you'd like to look in, get your finances in order. Determine how much of a down payment you'd be able to afford, and get prequalified by a mortgage broker.
Living and working in the same space also present a number of complications when tax time rolls around. Be sure to verify with your accountant the deductibility of expenses. If you do plan to deduct mortgage payments based on your use of the space for your business, be sure to define very clearly the physical area in which you plan to work, and if possible, maintain that space separately from your living space.