another financing scenario

[davidh73750]

I read some older posts on paying for costs of shop buildings. Some were getting 2nd mortgages or a refinance on their home.. I too agree with you should have some $$ saved back before doing one and not finance it 100%. I read and have been told that theses shops often have little added value to the house either. BUT when you are paying storage on a place you don't own some of it negates itself. Better to pay on something you own not rent.

Question. I have 10 acres with no house but improvements such as water, electric, septic etc. Would it be easier to get some financing for a shop? Land with a shop building is worth more than without. Different rules than with a house. I could use the land as collateral. I am talking a loan of 10 to 15K. I'm not putting up a 100K elaborate shop.

 

[KEH]

Are you talking about mortgaging the land to build the shop? The land is worth several times what you are talking about spending and a bank would LOVE to get the chance to foreclose on that. Correct me if I'm reading your plan wrong.

KEH

 

[davidh73750]

Yes that is what I am talking about. I plan on saving 50% of the shop and then asking the bank.

 

[jomobco]

Is the land free and clear?

 

[RCH99]

You should consider looking for an unsecured personal loan for that modest amount of money. There is no sense in taking the risk of losing your property if you ended up having trouble repaying the note, whatever the reason might be.

 

[KEH]

I would detach the land the shop sits on from the rest of the tract and only mortage that rather than risk it all. If the bank dosen't go for that find another bank.

KEH

 

[davidh73750]

land isn't completely paid for but debating to pay it off then get a shop or build shop and just keep paying note.

 

[ramtuff]

Another option is do you want to keep all 10 acres? If your local municipality allows it, you could subdivide the property and sell off a couple acres to pay for the shop.

 

[davidh73750]

if I sold part of it???!!!its in the country or should I say 5mi outside of town but then I'd have to worry if someone would junk it up or move an entire 3 generations of family into multiple dumpy mobile homes

 

[ramtuff]

Plant trees along the property line to hide the mobile homes.

 

[davidh73750]

Hmmm my 07 truck will be paid for soon maybe I could borrow 10K against it?

 

[Tscott]

Have you considered just saving the cash to do it? Good things come to those who wait. We wanted a family and decided that debt was not a good thing to have. We paid off about 25K in debt before we even began the shop. It feels so much better when you own it free and clear and the repo man can't come and take it. Took us about 3.5 years to work the whole deal in and trust me when I say it was worth it.

Tom

 

[davidh73750]

Have you considered just saving the cash to do it? Good things come to those who wait. We wanted a family and decided that debt was not a good thing to have. We paid off about 25K in debt before we even began the shop. It feels so much better when you own it free and clear and the repo man can't come and take it. Took us about 3.5 years to work the whole deal in and trust me when I say it was worth it.

Tom

I plan on saving most of the money. Thing is I pay storage on vehicles. I could be using that money towards the shop not paying it to someone else. If I save it all then move my cars into the shop after instead of using it towards the building I'm losing that money.
Think of it as this way. If I pay $300 storage for cars and I move my cars into a shop 2 years earlier(saving $7200) by taking out a 10K loan I think it pays for itself.

 

[Ohio Auto]

You're asking for opinions..here's mine. Do not sell any of your land, they're not making any more of it.

I was in a similar situation about 5-6 years ago. We bought 7 acres, took out a loan. As I was paying the land off I put the shell of my shop up. Once we got the land payed off we took out a construction loan and built our new home. At the same time...I kept plugging away on the shop....a little bit at a time...all cash. One year I was able to wire the whole shop. The next year I had the floor poured. Etc..etc.. until it was finished.

The best thing about putting your shop up first..even if it isn't finished is that you will need the storeage and work area while putting up your house.

It took me 6 years to completely finish my shop..I just finished it off with heat two months age.

 

[mrb]

no bank is going to write a mortgage for 10K....that falls withing the realm of a personal loan.

 

[Rosco]

How many cars are you storing? Here is what I did (3 cars). I built a very inexpensive shop by using the metal carport and closing it in. Cost me 2,500 and I built it on my BIL property. I then saved cash for my shop and have since moved my vehicles in and now my BIL owns the metal shop. Cost less than rent and we both made out.

If you build an enclosure out of a metal carport, you can use it for storage after your shop is built. You do not even have to concrete the floor if drainage is not an issue. you could pay for the metal building with cash and save the rent while building your savings for the shop. Paying in cash as you go will benefit greatly in the end.

 

[Falcon67]

no bank is going to write a mortgage for 10K....that falls withing the realm of a personal loan.

Exactly - what he said. And nobody is going to let you hock an 07 truck for $10K either. They might use it as collateral, but that's a maybe.

We looked at financing some lots. The figure was under 10K, but we thought about getting the financing to keep us more liquid through a house purchase and the selling of our old house. Banks said "no way, not even enough $ for us to think about". Options were to pay cash or take out a personal note at around 10% with the properties as collateral. We won't be going out to dinner much for a while, but we own the properties free and clear. Damn, that was a big check to write. But our inside joke is that if we default on the house, we can move into the shed next door.

 

[hifi_hokie]

10K?

Save it. No point in going into debt for that little.

 

[Chris Adams]

How many cars are you storing? Here is what I did (3 cars). I built a very inexpensive shop by using the metal carport and closing it in. Cost me 2,500 and I built it on my BIL property. I then saved cash for my shop and have since moved my vehicles in and now my BIL owns the metal shop. Cost less than rent and we both made out.

If you build an enclosure out of a metal carport, you can use it for storage after your shop is built. You do not even have to concrete the floor if drainage is not an issue. you could pay for the metal building with cash and save the rent while building your savings for the shop. Paying in cash as you go will benefit greatly in the end.

That was a darn good move.


Using that concept, but modifying it slightly, I would put a CHEAP full metal building just small enough to store the three cars. Then start construction on the 'real' shop right next to it. That increases the costs by probably 4k, but does it over time, and gives two buildings when I am finished.
Just a thought.

 

[bdk1976]

Money and materials are cheap now. I don't know your financial situation, but it very well might make good sense to borrow at a low rate, buy materials, and build before inflation kicks into high gear (and save storage costs as well).

If it takes you several years to save up 10-15k (while still paying storage) and prices rise significantly during that time (which is likely), you may find yourself with $15k in the bank, only to find out that you're going to need $25k in 'tomorrow's dollars' to build your shop. Back to square one with time lost and higher interest rates if you want/need to borrow then. Not to mention you'll also be out your $300/mo during this time....could be an expensive way to go.

 

[davidh73750]

A metal sided carport with garage door might be something to look into. I will check into it.

 

[Colonial Cobra]

Be sure to check with your locality. Mine will not let you construct the garage untill after the home is built. It was going to cost a ton of extra $$$ to make the garage into what they considered living space. And would then have to fight with the county to allow me to place a "second residence" on the property when I went to build the house. It nixed the whole idea for me and was the final straw in staying putt and modifying our existing house to get by.

Brad

 

[1320stang]

David,

I hope you're not building in the flood plain on the north side of town.

(I grew up in Hennessey.)

He has no municipalities to worry about, no building codes, no inspections, (he's in the wild, wild west, remember?)

That said, I'd go the carport route the guys have talked about, throw some gravel under it and call it good, once the shop is built, it's a good place to store an old Ford 8N and a brush hog, or parts.

 

[ToolLover]

Re: Some other ideas about building your shop and a good reason to do so...
First I would like to say I built my little 10' x 10' shop from scratch the first time.
At the time no zoning was needed.
Then I started a little business of my own.
This gave me the opportunity to write the shop off which eventually paid for the building and most of the tooling.
It was easy, just name your company and go for it.
Well, one thing led to another and along comes a bigger 20' x 28' shop.
Here again, all written off for the business.
Lo and behold, the need arrises to expand and along comes the 40' X 70' third shop.
I can say without a doubt, that first shop should have been bigger with planning for enlargment.
There are so many blue collar workers today that cannot begin to hit their a$$ with both hands that your abilities are much needed and will only grow to who knows where in the future.
Even in the bad economy, your abilities will only be stiffled by the lack of a place to perform.
Do it, Do it! Strain yourself and just Do It!

 

[PaulR]

If there's no house and no planned residence there I'm not sure how the bank would classify the loan. If it was personal, that would mean a very high interest rate. If you do have equity in your home I would go that route, rates are still very very low. If you're talking about putting a business in there then it would be a commercial loan, a few points higher than a home mortgage or equity, but still lower than a personal loan.

good luck, banks are stingy these days, with good reason I suppose.

 

[billspit]

Check about a loan where farmers get them. Tell the bank you want to start farming and need a shop.

 

[mad57]

I doubt the township will let you build a secondary structure before you build a primary,,unless its a commercial zoning id say its not gonna happen.. if you do apply for the permits to build id say go ahead and apply for a house and than the garage, and state that your gonna build them at the same time than start the garage and fall short of the house, we did that here in nj when i built my first garage but i did eventually finish the home. as far as a mortage for 10 gs i doubt it again .if you have that truck borrow against it or home equity loan on another home you own, banks are tough these days good luck to you.

 

[RPH]

See polebarns going up on empty lots here all the time. Folks buy 5 - 10 acres and set up the shop, no house.

 

[32rules]

Get a line of credit (ie 2nd mortgage) Banks do them all the time for even less than $10,000.
Its still a mortgage and interest would be deductuble.
No reversion if you cant pay the payments and the bank takes it back.
If you borrow against the truck and lose it you could still owe the money (reversion)
But the best way is pay as you go and youll nver loose it unless property taxes go crazy.

 

[jclem40c]

Go to the bank and look into a home equity loan. Rates are cheaper
and you can rite it off your income taxes. Your accountant will
like that much better at tax time

John

 

[bazzateer]

Its still a mortgage and interest would be deductuble.

Ah, tax deductable mortgage interest, those were the days. Something else Tony Bliair and Gordon Brown stole from us.

 

[32rules]

Ah, tax deductable mortgage interest, those were the days. Something else Tony Bliair and Gordon Brown stole from us.

Well they are working on it here.
Damn uncontrolable spending freaks

 

[472scout]

Do you already have a house in your name, money saved up to cover 6 months of unemployment, zero credit card debt, plus quality health insurance? If so buy the building. It's obvious you want it. Personally, I wouldn't want a shop that wasn't collocated with my house not to mention the security issues of a shop sitting in a remote field, but I'm sure you've already considered that.

Post pictures of the cars.

 

[BUGTHUG]

I would just try and get a second on the land. Even though they aren't making more, there still is plenty in OK. Unless the land is old homestead thats been handed down from Grandma, then I would talk to the bank about a 2nd.
Only problem is money is hard to get, the banks that are still open , have plenty but they don't want to loan out much.
Maybe if you use the same bank for all your finances and talk to Bubba and tell him if he helps with this loan on the out building, when it comes time to build, they will add the 2nd and make a whole new first loan. When they do that they make money on all the new finance charges, and appraisels.
I don't know your personel info , but maybe you can build a Morton building and live in one end of it, and shop out the other end. Keep the dream.

 

[Dragster Racer]

My route would be to get $5,000 in your pocket, and then go home equity for the rest, and plan on knocking that out in maybe two years. Perhaps just build the shell with gravel floor for now to get the cars in storage. I'm a cash guy usually, so the home equity thing is a stretch for me. Or, do a real cheap building that you would later use for storage, and build your shop when you have a bit more coin.

 

[Red05GT]

What about the 12-18 month no payment/no interest offers from Lowes/Home Depot.
Main caveat is, if you don't have the money to payoff in full by end of term, interest
drops back to day one and is calculated at 29% +.

 

[GarageEnvy]

I work with banks on this stuff all day long as an appraiser and here are some facts. Banks don't like non-owner occupied properties. They have a higher default rate. Since your property does not have a home and apparently has little to no agricultural value and negligible income potential (if even legal) from renting the shop space, it would be very difficult to assign value beyond bare land to it. Basically, you're right, the shop won't add that much value (if any). Others are correct on the loan size being too small. Most my clients won't touch anything under $50,000. Private money is an option but you'll pay ridiculously high interest rates. I have mixed emotions about debt so I'll state my bias and situation up front. I'm self-employed with income that can vary between 40k and 180k so budgeting is difficult. For that reason debt makes me nervous. My wife and I spent the first 10 years of our marriage not eating out, not going to the movies, doing our own lawn and not buying new stuff. The reward was paying off a 30 year mortgage in under 10 years. Now, we just did a complete exterior remodel with the addition of a new 1800sf garage and we used a HELOC to finance about half of it. The reason is that with an after tax rate of about 3.25% it's very cheap money. Also this year my income is closer to the lower end of that range than the upper and labor is very cheap right now. I'd recommend a HELOC if you have property with equity. Since we had a 200k+ home with no debt, getting a line of credit took about 2 hours of time and there was no cost involved. The more stable your income is and the better your debt to income and equity ratio currently is the more enticing (and safer) financing your project is at these low rates.

 

[rwhite692]

You should consider looking for an unsecured personal loan for that modest amount of money. There is no sense in taking the risk of losing your property if you ended up having trouble repaying the note, whatever the reason might be.

^^^^Exactly. (And also, what GarageEnvy said, banks hate non owner occupied properties)

Also, It is highly unlikely that any bank is going to give you a construction loan to build a "hobby" shop on vacant land without there also being a residence.

 

[NY Old Guy]

If you have to pay a bunch of fees, a high interest rate, and you really don't need the shop, then don't do it. If you can get a really low rate, would pay little to no fees, and also you really need the shop, then do it.

 

[jessemac]

hey i work at a bank and write loans pm me and i'll let you know what I'd do if i was you not what the bank would want you to do to make them money.