I have a 1200 square foot house with a finished basement (gives us an additional 600 feet). Anyway, 4 years ago hubby fully converted half our garage to additional living space and we turned the entire room into a daycare/playroom. So, all of the toys and daycare supplies are in there.
For daycare purposes I only use the main floor of my home and the playroom which is right off the main living space so I can see everything going on at all times.
Therefore, the kids can use the entire main floor (kitchen, living room, dining area and playroom) BUT my ONE rule is that toys stay in the playroom. We do crafts and playdoh etc on a foldup Little Tykes table in my kitchen or hallway when we need the extra room.
Keeping the toys in the toy room makes my house feel more like my HOME because it isn't constantly congested with toys and daycare stuff.
The upstairs and basement are off limits to dckids. I really feel strongly about having some sacred space that my hubby and kids can run to if they just need to get away. I have two kids of my own - a 7 yr old and a 4 yr old and I have been providing care for about 4 years now. Right from the start I wanted to ensure that my own kids never, ever, felt that they were in daycare themselves. So, the off limits areas give them a sense of still being at home and not at 'work' with me if they want to get away from the chaos or just have some quiet time without other kids.
Also, seperate spaces allow my kids to have toys and activities they do not want to share with the others. They share me, their home, their yard, their dog and many of their toys so they also need to feel they have things that are just theirs.
I also have a washroom off of the playroom that is for daycare use. We have another one upstairs for personal use if we want some privacy etc.
I think my home is set up very nicely for daycare use. Many interviewing parents are surprised by my 'daycare specific' playroom. It is also nice because at the end of the day I can close the bi-fold doors and walk away and not be looking at highchairs or toys etc.
I have a 120 foot lot so our back yard is pretty huge by most standards in our city. It is fully fenced and I have a playset, sand box, riding toys, patio, small patio set with umbrella for the kids. I also have a 5 foot gate with a lock on it so nobody is getting in or out without me knowing.
I have included some pics....