Does a large garage or quality out building increase your property value?

AbitNutz · Feb 8, 2012

So I'm really set on a building by a quality builder like Morton. 45x40x16? Height determined by car lift (Mohawk), RV & Sailboat.
Perma-Columns, 6" rebar concrete floor. All other details up for discussion.

I have something over an acre of ground and the garage would be behind the house and wouldn't dominate the look of the house from the street. I can see dropping $40,000 in it with the lift and interior finishing.

Money isn't the main issue, I'm not saying it's not a HUGE issue but it would really pi$$ me off to drop that kind of cash, have my property appraised and find out the building detracted from the value or added almost nothing to the property value.

Kind of like a built in pool around here...they add nothing and many times the real estate folks tell sellers to fill them in! A good one cost as much as the garage I'm thinking so hard about.

Again, we're talking a really good quality building with a as much of a roof pitch as I can afford. It would be colored like the house (requirements of the covenant).

TAMPAGT07 · Feb 8, 2012

Unless you are planning on moving in the near future, don't be concerned with the value of your garage...Build it for yourself and enjoy it....I am putting a ton of money into my home in the next year or so, and I am doing it for my wife and I..We have no plans to move and we will enjoy the upgrades for many years to come...We are not worried about the property value...

AbitNutz · Feb 8, 2012

No plans to move. Also, if the county decided that the building didn't add so much. Maybe the property tax wouldn't go up that much....

TAMPAGT07 · Feb 8, 2012

I would check with the county about the future property taxes that would be assesed..This would be nice to know upfront..

kartracer23 · Feb 8, 2012

Yeah, it will increase the value (somewhat) to the right buyer. And yeah, you'll get screwed on property taxes. My mom's garage (4 car, 2 story) is larger than her house and she gets killed on taxes becasue of it.

jhelrey · Feb 8, 2012

The house and garage is only worth what someone is willing to pay for it... For instance, if I feel the garage is a great need as well as the house I will pay more. If not, I will pay less. Just like when I bought my house... I didn't beat them up too bad on price because the garage was the selling point for me.

ptschram · Feb 8, 2012

When I was shopping for a house in '07, I was told by many real estate agents that a building the size I wanted was not gonna happen as it would significantly detract from the value of the home.

Few people want a huge building to maintain, much less pay property taxes on it.

I had a horrible time finding a home with an outbuilding of more than 1000 sq ft.

Aberdale · Feb 8, 2012

Any "improvement" to your property is an excuse for the county to raise your property taxes. So yes, a shop will add to the value of your property as far as the county tax assessor is concerned.

If you sell your property down the road, the building will also add to your property value, but it may limit the number of potential buyers to those looking for a property with a shop/barn. Keep in mind if you build a $50,000 building, it may only increase your resale value by $25,000. It will be difficult to get the full value back out of it, but then again, if the housing market tightens back up, and inflation takes off, you might come out alright.

My suggestion is to build it with the viewpoint of the value it has to you, and don't worry about what it might be worth to someone else. Especially if you plan on living there for longer than 5 years.

Dale

Nighttrain · Feb 8, 2012

all good advice above. What other properties in you local area have big shops in the back yard? If it is common than I would say there is a market for it for re-sale. Again if you plan on being there forever build what you are going to want but build it to look in-place and not out-of-place ,as you mentioned matching the house. The only time you want the value of your house to go up is when you sell it, not every year at tax time.

info2x · Feb 8, 2012

I bought my house about a year ago, when they did the appraisal the garage was valued at 10k, and my agent was shocked to see it rated that high. I can tell you that I insure it for a lot more than 10k.

RKA · Feb 8, 2012

It really depends on the area and the type of house, so there is no single answer that fits the bill. Generally speaking, in a residential area where 2 car garages abound, that oversized shop/garage won't command more unless you find a buyer specifically looking for it. What it does is shrink your potential pool of buyers, and that's really where you find potential worth. It's not what some appraiser says, it's what someone is willing to pay for it. If that potential someone shrinks from 1000 potential buyers to 10, well.... In most cases (not all), the house that appeals to the masses will sell and sell for more.

Jehlrey is a good example of finding a 1 in 100 buyer. You notice he says he didn't beat them up too much because the garage was the selling point. You'll notice he didn't say he paid extra for it! That's pretty typical in real estate when you do something customized to your needs with limited appeal.

That said you have to decide whether the investment potential of the money poured into the shop is more important than the satisfaction. If your goal of making or preserving wealth comes first, it's probably best to leave things as-is.

barks · Feb 8, 2012

Go down and have this conversation with the local tax appraiser. You can't hide anything from them anyway. They can give you an idea of what the building will do to your taxes as well as what similar buildings have done to sales prices in the area.

Jagmandave · Feb 8, 2012

You might also call the real estate agent who woks your neighborhood, just drive around and see who's name is on all the for sale signs and call him/her - they'll know the answers to all those questions. One stop shopping!

smschriefer · Feb 8, 2012

According to the National Association of Realtors/Remodeling, it is one of the worst investments you can make to a home. Expect to lose 1/3 or more on your investment.
http://www.forbes.com/2010/04/09/best-worst-home-improvements-personal-finance-diy_slide_14.html
With that said, I would still do it if I wanted a new garage. It really comes down to your needs and if you can justify a need, why not. As for taxes, yeah, they will go up, but it is an outbuilding and the taxes are less than the primary residence.

TAMPAGT07 · Feb 8, 2012

barks said:
Go down and have this conversation with the local tax appraiser. You can't hide anything from them anyway.

I agree...After Nazi Germany fell, alot of the Nazi's fled the country...Many of them ended up in tax appraisal offices....It's a damn shame....

Al Bundy · Feb 8, 2012

I wouldn't be too concerned about your property value unless you plan on selling in the near future. If you want a garage/shop on your property then build one. I would think twice about spending $40K on that size metal building. For that kind of money you could have a lot more.

5lima30 · Feb 8, 2012

It should raise your property value but... keep in mind that if is a "Garage Mahal" costing lots of $$$ you probably only get the value added of an "average" garage. Depending on location and climate a heated/ cooled garage will probably bring more $$$. I am not a real estate appraiser so YMMV.

evildky · Feb 8, 2012

it adds almost nothing, I did a market study for a property years ago, and a $10k garage added abotu $5k to the value, granted it might make it more marketable, and it will vary area to area, addign a garge to the only house in a neighborhood wihtout a garage will add mroe to it than adding a second garage to a house that's in a neightborhood where everyone has a garage

Jack Olsen · Feb 8, 2012

As others have said, there's no real payoff for spending a lot on a garage -- other than getting a cool shop to work in. You'll pay more in taxes, and it will generally only increase your home's value to the extent that there's any local difference between having covered parking and not having covered parking. Outside of that, the percentage of home buyers interested in a large shop is so small that it would only affect pricing in very particular circumstances. Worse, a big shop will be a negative to most buyers, because of the maintenance and tax costs.

To most people, it's like having a helicopter landing pad on their property. Simply not something they'll ever have a need for. To 99% of the population, a garage is just a place to park the cars.

A shop is not a good investment, unfortunately. But I'd say it's good for the soul, anyway.

IONH · Feb 8, 2012

jhelrey said:
The house and garage is only worth what someone is willing to pay for it... For instance, if I feel the garage is a great need as well as the house I will pay more. If not, I will pay less. Just like when I bought my house... I didn't beat them up too bad on price because the garage was the selling point for me.

Same goes for pools, though I suspect more people would prefer a pool than they would an oversized garage.

My detached garage is just a few feet shy of the size of my house. My main house has another single car garage (though double wide inside) in the basement. Being able to put potentially 6 cars inside a garage coming from working on cars on a sloped driveway is what sold us on the lot.

The house is dark green shake siding and the garage is white vinyl by the way... :rocker:

So I agree with the others. If you are staying for a long while, do what makes you happy. You will not get the same money back that it costs to build so it should not be a short term investment unless you are willing to lose some.

ZRX61 · Feb 8, 2012

One thing to consider:
If you build a 2000sqft shop (or whatever size), & live there for the next 10-20-30 years.. take into account what you would have paid to rent a shop that size...

Kevin54 · Feb 8, 2012

The taxes will vary depending on whether it is stick built or if it is a pole style build. Also taxes will vary from state to state, county to county. I asked my auditor how much it would increase my taxes if I added a 24x24 addition on to my 28x36 and she told me $124/yr increase.

Falcon67 · Feb 8, 2012

My old shop (insulated 20x24, AC unit, etc) helped sell the old house. The shop is now a party room/man cave. The new one - maybe, for the right buyer. It's will for sure hit us on taxes. However, it is on a separate property so a house buyer could opt out of buying that too. If we moved somewhere in the same town, I could essentially keep the building by putting up some fencing. In fact, my wife has a bit of a scheme that I should build a 3-2 on the front of the lot on a pay-as-you-go deal. Then we move in there and sell the existing. I call BS, but you never know....

We're probably looking at $500+/yr tax hit. We'll see here pretty soon. I need to go to the appraisal district and find out whats up their sleeve.

EDIT - I see online they have merged our 3 lots into one for purposes of a homestead exemption. This is a good thing.

fergus · Feb 8, 2012

evildky said:
it adds almost nothing, I did a market study for a property years ago, and a $10k garage added abotu $5k to the value, granted it might make it more marketable, and it will vary area to area, addign a garge to the only house in a neighborhood wihtout a garage will add mroe to it than adding a second garage to a house that's in a neightborhood where everyone has a garage

This. As a former real estate appraiser, this is typically what happened. Garages got adjusted at about $5000 per stall. Usually the max adjustment would be around $10k regardless of size. This is usually what the market reflects in suburban areas (and small acreage areas), in California at least...

Kev442 · Feb 8, 2012

Expect a 50% loss on a building that large on a one acre lot. It will turn off a lot of buyers. Shrink the building 30% and it will go better. Your choice.

Tbucit · Feb 8, 2012

Not sure if it will increase the value of the property but here the taxable value will. I am currently contesting my taxes because the rate that was explained to me was approximately $10 per sq ft. When I got my tax bill
it was valued at $25 per ft. After calling I got the explanation that I had a very nice garage and that was the reason it was higher. I thanked him for his compliment and told him I would see him at the appeal hearing. there are five other detached garages around me and each one is $10 per ft.
Randall

GarageEnvy · Feb 8, 2012

Lots of good info and some pretty large generalizations. My answer may not be as definitive as you'd like but it comes from the perspective of a certified appraiser (no Nazi affiliation).

What you are concerned with is the contributory value of an improvement. It may or may not add value depending on what buyers preferences are in the area.

The extent of value depends on what others recognize as the highest and best use and maximally productive. In my neighborhood 2 and 3 car garages are the norm. The difference between 2 and 3 is about $5k. But that doesn't mean my 5 car is $10k more than the 3 car. The technical term is superadequacy or overimprovement for the area. There may be a market preference for it but it may not have a value. It might be an outright liability depending on what buyer preferences are. Also, it might be a less obvious liability if it precludes another preferred use. In other words, if you install the shop and the typical buyer would like a pool and now there's no room for that, you diminished the appeal.

Market value is determined by the most probable price to the typical buyer. Actually there's several definitions that are much longer, but that's the crux of it. The guy who spends an hour a day online talking about garages and staring at welds like they are naked women is probably not the typical buyer.

Finally, don't confuse cost with value. There's no correlation (well almost no) between replacement cost or insurable value and market value.

Tomorrow I'm going to a house that was expanded from 800 to 2800 square feet in an older run down neighborhood of small homes. He's about to get a lesson on superadequacies.

StaggeringGoat · Feb 8, 2012

Near me is a house for sale that I want badly, but, unfortunately I'm not in a position to sell my current house. The house comes with not one but FOUR shops from 24x30 to 60x80, a full paint booth, multiple in ground lifts - it's a ********* for a lot of guys here. (oh, there's a house too!)

That said, it's sat empty and for sale for about a year now. They are only asking what I would say the ground is worth. It's in a great location, I can't understand why it hasn't sold yet, but maybe all the shops are scaring some people off....

On the other hand, to someone like me, that's a BIG selling feature!

Shadowdog500 · Feb 8, 2012

If you don't put up the building, what are your storage plans for your boat and motorhome? I built my big garage for my needs and I have no intentions on selling any time soon, so I wasn't overly concerned with the return on investment. The building was of great value to me since I had a need to store my motorhome. The shop portion with my Mohawk lift was icing on the cake for me.

You may want to see how your property is zoned. My property is zoned Light Industrial, and I had everything done in the building to commercial specs so someone could start a business out of it without changing a thing. If I ever did sell, I expect someone with a business to buy it, and I would probably wait for that 1 in 100 person to come along.

Chris

CamarosRus · Feb 8, 2012

I just bought the below place in Auburn,WA. Sits on 1 Acre in nice middle class rural neighborhood (35 miles from downtown Seattle). I probably paid a minimum of 25k-40K
premium for the 5 year old shop. Pretty sure seller had $75-100K into it.
YES, I want to make changes to it.......but cost will be an issue.

Mmfh · Feb 9, 2012

StaggeringGoat said:
Near me is a house for sale that I want badly, but, unfortunately I'm not in a position to sell my current house. The house comes with not one but FOUR shops from 24x30 to 60x80, a full paint booth, multiple in ground lifts - it's a ********* for a lot of guys here. (oh, there's a house too!)

That said, it's sat empty and for sale for about a year now. They are only asking what I would say the ground is worth. It's in a great location, I can't understand why it hasn't sold yet, but maybe all the shops are scaring some people off....

On the other hand, to someone like me, that's a BIG selling feature!

That sounds as you say like a dream setup! Mind letting go of where its at?

Provincial · Feb 10, 2012

StaggeringGoat said:
Near me is a house for sale that I want badly, but, unfortunately I'm not in a position to sell my current house. The house comes with not one but FOUR shops from 24x30 to 60x80, a full paint booth, multiple in ground lifts - it's a ********* for a lot of guys here. (oh, there's a house too!)

That said, it's sat empty and for sale for about a year now. They are only asking what I would say the ground is worth. It's in a great location, I can't understand why it hasn't sold yet, but maybe all the shops are scaring some people off....

On the other hand, to someone like me, that's a BIG selling feature!

There is a term in real estate valuation called "comparable sales" that is a comparison of similar properties actual sales prices. When a property has unique features, like an oversized shop, there are very few local sales to compare to. This is part of why these improvements don't earn back their cost, the biggest reason is simply supply and demand. There are too few of us shop/garage-centric types out in the market looking for the ideal place to tinker.

On the other hand, comparable sales can be a useful tool in fighting a high tax appraisal. If no one has bought a similar property recently, or better yet sold their property for an extremely low price, it gives you a very strong case for a lowered tax appraisal. The tax man will try to substitute actual cost or replacement cost, but that is not what the statutes empower - it must be the value based on actual sales of like properties!

StaggeringGoat · Feb 10, 2012

Mmfh said:
That sounds as you say like a dream setup! Mind letting go of where its at?

I'll have to wait until about July to tell you, there's a small chance I may be able to ****** it up if it's still for sale then. I should drive by and take down the for sale sign... :bounce:

geologist · Feb 10, 2012

Beware of the taxes. When my grandmother decided to build a new home, it cost about $85,000 to build. The tax assessor has appraised it for $125,000 even though we've got all the receipts to show that it's an $85,000 house.

Shadowdog500 · Feb 10, 2012

StevenBiars said:
Beware of the taxes. When my grandmother decided to build a new home, it cost about $85,000 to build. The tax assessor has appraised it for $125,000 even though we've got all the receipts to show that it's an $85,000 house.

I always joke that a homeowner should have the right to demand that the town buy a house for half to three quarters of the assessed value. This would keep them from over inflating the assessed value like some towns do.

Chris

IONH · Feb 10, 2012

Provincial said:
There is a term in real estate valuation called "comparable sales" that is a comparison of similar properties actual sales prices. When a property has unique features, like an oversized shop, there are very few local sales to compare to. This is part of why these improvements don't earn back their cost, the biggest reason is simply supply and demand. There are too few of us shop/garage-centric types out in the market looking for the ideal place to tinker.

On the other hand, comparable sales can be a useful tool in fighting a high tax appraisal. If no one has bought a similar property recently, or better yet sold their property for an extremely low price, it gives you a very strong case for a lowered tax appraisal. The tax man will try to substitute actual cost or replacement cost, but that is not what the statutes empower - it must be the value based on actual sales of like properties!

We had two houses on my short street (culdisac of about 9 houses total) be sold within the last 3 years. One is just a split with a finished downstairs. The other is a split with a finished downstairs and attached 2 car garage coming off the side.

When I refi'd last, those were used as comparable sales to mine. Though mine has a detached 24x36'ish garage which is bigger than either of the others, yet I have only a half finished basement (the other half being another garage). Worked for me as those both sold for more than I had paid for mine two years earlier.

MP&C · Feb 10, 2012

We have two detached garages that were built at different times, and throughout the course of a couple different refi's, the property has been "professionally appraised" with one detached, and then two detached. Where our house is similar to others in the area, during both appraisals, the "professional" had no other similar houses with detached garages in our local neighborhoods for comparison of sale prices, etc, so rather than be wrong, they severely low balled the number. The addtional value added for both garages wouldn't have built half of one. But in our favor, the Credit Union that was doing the refi looked at the assessment, and familiar with our property, insisted their appraisal "professional" adjust the figures.

So unless you are using the value for a refinance, I wouldn't sweat what the value comes back as. If and when you go to sell, there are folks out there looking for workshops on their own property, and the bottom line will be what it is listed/sold for, not what the property value is.

Kevin54 · Aug 28, 2013

I think today, more so than in the past. a garage, and a garage that is fixed up brings more value to a home than it used to. If one looks at any auto related magazines, woodworking magazines, and various other home related magazines, there are ad after ad in them about garages, cabinets, flooring, tool storage, and so on. And they are showcasing garages.

20-25 years ago, a garage was a storage unit, and if you were lucky enough to have some extra room, you could park a car in there. Todays garages are getting to be an extension of the house using nice cabinets, nice flooring, different wall coverings, televisions, stereo systems. They also hold family get togethers, which one would have never though a few years back of having a get together in a garage of all places.

A real close friend of ours that is a Realtor and owns her own business....I notice that on a lot of her ads of homes, a garage gets about 1/3 of the total photos taken, and attention is brought to the amenities of the garage.

So most definitely it increases your property value, as long as it is a garage that is tasteful, and not just some shack tossed up with multi colored used shingles and mismatched siding and ****. The amount it increases though has many many variables. Location being one, the style of the garage, attached vs. detached, bonus room above or not, heat, electricity, floors, and so on. It may increase the property value by $5000, or it may increase it by $50,000. But one thing to remember, you won't increase the property value by as much as what you have into the garage.

justanengineer · Aug 28, 2013

Not to needlessly add onto an old thread Kevin, but whenever folks start talking outbuildings the key things to remember are layout and property size. From what I saw around here when house shopping before buying last year, a 40'x40' on only an acre would detract from the value while jacking up the taxes. Properly designed into a larger property it would be no problem, but on these smaller properties youd have to be foolish to build one, much less pay anything extra when buying one. One of the others I looked at in my neighborhood for example has a 30'x60' garage, but it was both an eyesore and seemed huge on just over an acre, which isnt good bc it kills the yard. For the elderly PO who had a motorhome and didnt need/want property to maintain it worked, but for anybody else it was hideous. The property without the garage was easily worth $75k but with the garage it ended up selling for only $45k bc most folks care more about having a nice yard than a big garage.

NHBandit · Aug 28, 2013

Call me strange but I really don't care one little bit what having my 30x40 garage does to the resale value of my place. I guess I'm just the type to try to live today and I'll worry about tomorrow when the time comes. The value to me is being able to work comfortably on my projects, have plenty of room for my toys, and a little "office" area to display my collectible stuff and to do it NOW. If my kids get 20k less for my place when I'm dead so be it. I'm sorry but I simply don't "get" those guys who worry about every little penny when subjects like this come up and don't consider the value of the enjoyment a nice big garage will bring you right now. These same guys though, will buy a brand new car that costs 50k or more knowing it loses a TON of value the minute they drive it off the lot and will continue to lose value as long as they own it. They buy it anyway because they like it but don't feel the same way about other things. Ah well.. I gave up a long time ago trying to figure people out. :lol_hitti

Does a large garage or quality out building increase your property value?

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