garage dreams...

[slickscustoms]

hey guys all of you have really great looking shops. one day i hope to join you in having my own shop. right now i'm working out of my 25x25 shop that joins my house and in the gravel drive way. my shop is full of motorcycles and jeep **** so most of my maintenance is done in the driveway. thats getting really old, so ive dreamed up a 30x40 much like purduesd's "truck shop" and beartoothweb's "montana cobra shop". those are almost spitting images of what ive had in mind now for a long time. i want one tall bay for a lift and the rest of the shop not as tall with the differant roof lines to match my house. i dont know enough about carpentry work to even begin to tackle a project like that. i have a nosey question, you dont have to answer if you dont want. how do you go about financing a shop? i could go buy a prepackaged shop from one of the usual shop builders but thats not what i want. so other than paying cash... i wish i could but i wont ever get one like that. i'm woundering how to go about paying for it. i could probly sub it out and do as much as i could on my own to save money. do finance companys loan money for shops?

 

[Kevin54]

For me I used income tax returns, worked overtime, and borrowed a small amount from my 401K. I didn't take the money out on a withdrawal, but I made a loan on it. Low interest rate and all interest went right back in to the 401K.
And before I get flamed on pulling out of my 401K.....I put in more than most knowing that I will need to get a loan someday. So instead of going to the bank, I am paying my loan ahead by putting more into my account. My financial status is not one where I make enough money to shell out thousands in cash like some people can so I kind of plan mine this way. I could lower the percentage of my 401K and then put money into a savings account for future use, but I put it into the 401 and let it work for me for awhile. I get a better return on it over a savings account.

 

[Nostraquedeo]

I had a lot of equity in my house, so I just refinanced with cash out last year. I have done all the work myself, so it really didn't cost that much.

When I built my home about 13 years ago, I collected all of these credit card applications and submitted them all on the same day. The values were different on them all, but when all was said and done, I had about 50K worth of credit cards. I had about the same amount saved and borrowed the rest from my folks. When I completed the house, I just did a refinance with the bank and paid everything back. They wouldn't loan me the money initially without a general contractor and a lot of other bull ****. Anyway, that worked for me then. It took about 100K to build a 250K house doing most all the work myself, and with the help of my dad and brother.

 

[OldCarGuy]

Although I would never recommend borrowing money to build a garage. If you feel that's the only way you're going to own that dream garage. And if you own your home, with some equity and in good standing with the mortgage holder. I would suggest to take out a home equity line. That would be the least expensive interest. Plus the interest could be taken off your Federal Income Taxes...

 

[swharris]

I hate to disagree with you OCG, but HELOC's are usually MORE expensive than refinancing with cash out. Currently someone in good standing with a relatively low LTV ratio should be able to get something(refi rate) at or below 5%. With that said, this only applies if he owns a house with some equity and his credit is good. Also, banks are being super picky about who they loan to now days after all the stupid loans they made in the past.

 

[bluesman2a]

If you look at my shop build, you'll see it happened/is happening in stages. Most people can afford reasonable shop space if they plan accordingly. In my case, I paid for the initial project with some equity we kept out of the sale of our old house, in the move to our new house (which was done ostensibly to have space for the shop complex).

That got me the concrete, and the exterior shell. I did my own electrical, insulation, wall sheathing, and painting. The most expensive part of any build will be concrete. From there you can make do with relatively bearable incremental costs.

I planned subsequent stages as the time, opportunity and budget allowed. For example: I wanted a bump-out on the back, I had a friend with an idle framing crew. They built a 10X39 covered area in the rear for about $1800 in labor, plus materials. That was my tax return last year. I had some money saved up and had an opportunity to get a slab poured for it this year for about $2200. I paid that out of pocket. Once that was in and the checkbook had recovered, I bought the lumber to frame in the walls. Now I'm no framer, but I can make things square and none of it was structural, I was just filling in the blanks. The area is now closed in, I bought a garage door taking advantage of the tax rebates getting all energystar rated stuff and managed to get 30% of that back in this year's taxes.

Now I'm amassing what I need for electrical in the rear section. This year's tax return will go to pour the slab and rough-in the foundation for the shop bathroom.

If you do a little at a time, put your own work into it where you can, and pay out of pocket, you can do a lot.

 

[Full Size 66]

I also believe that to cash flow the project is the best way, that being said I used to think the HELOC was going to build my shop at the old house. I'm so glad we sold in september 07, do you guys remember what happened, the housing market began a steep dive. If I had done the HELOC I would have been up side down so far!!! The sale of that house is one of the best things that ever happened to me, also one of the toughest. I now work in a one car garage and it is TIGHT. I do have ideas for a shop but it will have to wait till I get CASH !

 

[ket-tek]

I think areas vary so drasticly for real estate sales and assements that there is no single solid answer. But an equity loan can be a decent route if you just aren't gonna be able to get the cash to complete the project in a reasonable amount of time.

Some county's codes won't allow you to drag it out for 3 years, and piece it together a little at a time. I would determine how much you need to get a final occupancy permit and go from there. Usually slab, framed, sided, roofed, doors, and windows. Get it inspected and then you can a the rock, insulation, extra lighting, etc over the next few years.

It's impossible for anyone to tell you what is a good route because we don't know your real estate market, neighborhood, mortgage balance, home assesment, available equity, monthly expenses, or income.. (nor do we need to)

But I do feel that a Equity Loan can be a good route, if your house is still worth quite a bit more than your mortgage balance + desired amount to borrow.

An equity loan will usually get a much lower interest rate than a equity line of credit, so research that aspect when making a decision..

Refinance can be a good solution too depending on your current rate, as loans in the 4's have been possible recently if you have great credit.

Building a secondary massive shop usually won't increase your home's value like you think it should, even more so if you've already got one garage, so I would not pull all available equity of a house to add a shop it.

But if you plan to be in that house for quite a few years and it is your enjoyment to have it then I don't see why it's a bad idea.

On the other hand taking an equity loan to buy a CAR with IS A BAD IDEA!

 

[OldCarGuy]

I hate to disagree with you OCG, but HELOC's are usually MORE expensive than refinancing with cash out. Currently someone in good standing with a relatively low LTV ratio should be able to get something(refi rate) at or below 5%. With that said, this only applies if he owns a house with some equity and his credit is good. Also, banks are being super picky about who they loan to now days after all the stupid loans they made in the past.

Everyone entitled to their own views. But I don't feel that cashing out or refinancing a home loan is the best interest of long term financial strength. It's never a good idea to lengthen the time to become mortgage free. And having an equity line line tied to a home mortgage gives you more flexibility, than having one big loan. With proper discipline, you can become debt free sooner. With the best credit and down payment today, you can expect 4.75% interest on a home loan. I don't know about you; but I have a home equity line of 1% below prime,, so borrowing today would be 2.25%. Plus there's no prepayment penalty. The down side is that it's floating and will go up. So you sure want to pay it off before rates go up. And they will!

Using prudent use of the banks I made myself debt free long before I retired. And haven't had a home mortgage in years. Although I do have a home equity line, there's no balance on it.

 

[regguy1]

Everyone entitled to their own views. But I don't feel that cashing out or refinancing a home loan is the best interest of long term financial strength. It's never a good idea to lengthen the time to become mortgage free. And having an equity line line tied to a home mortgage gives you more flexibility, than having one big loan. With proper discipline, you can become debt free sooner. With the best credit and down payment today, you can expect 4.75% interest on a home loan. I don't know about you; but I have a home equity line of 1% below prime,, so borrowing today would be 2.25%. Plus there's no prepayment penalty. The down side is that it's floating and will go up. So you sure want to pay it off before rates go up. And they will!

Using prudent use of the banks I made myself debt free long before I retired. And haven't had a home mortgage in years. Although I do have a home equity line, there's no balance on it.

Good Post. The flexibility is a good aspect of a HELOC. I think the costs would be much higher with a Refinance than Heloc.

OCG, I have the same deal on my HELOC I took it out in 2006. It might be prime -1.10% (?) but the rate is 2.25 now and minimum Pmt is interest only.

I just opened a checking account with a out of state bank, it pays 4.30 APR
on balances up to 25,000.00 with a couple of easy to meet conditions.
If you have any idle money in a money market acct. now paying less than 1%
you can pick up an extra grand a year just for letting it sit in the checking acct. (25K)

Link Here: https://www.checkingfinder.com/

For anyone who wants to see their credit report go here:

https://www.annualcreditreport.com/cra/index.jsp

This isn't the one in the TV ads where they scam you into joining a 14.95 / month service. You're entitled to a free report each year from all three credit rating companys. If you order one every 4 months you can monitor your report throughout the year.

They won't contain your FICO Score an important number for lenders.
You can get it here but you'll have to pay for it. (you might be able to get a discount if you type in the month and 15 (February15) (15%) in the promo code box at checkout.

http://www.myfico.com/Default.aspx (select FICO standard)

A good credit score can save you money: Lowest rates on loans / credit cards. Insurance companys look at your score and generaly give prefered rates to high score people.

 

[Goobzilla]

I worked a lot of OT at my job in Washington so I was able to pay cash for my building after I moved here. It's a good feeling to know it's paid for.

 

[ddawg16]

My HELOC interest rate is 3.25% right now.....and the interest I pay on it is tax deductable...I haven't found any CC with that kind of deal...

I did a combination of both....used the Heloc for the big ticket stuff (foundation) and then pretty much paid for the rest as I went....I have a little bit of CC debt that I should have paid off by summer....then it's time to do the 2-story addition to the house....

 

[what2do]

regguy1, Great post! I will digest it and think some more. Thanks

 

[Jack Olsen]

I did a combination of both....used the Heloc for the big ticket stuff (foundation) and then pretty much paid for the rest as I went...

That seems the smart path to me. Use bricks and mortar to pay for more bricks and mortar, but not toys. Hobbies should be cash and carry.

 

[bazzateer]

I have a little saved from my house purchase budget which will hopefully pay for the foundations and concrete floor. The rest will only get done when I have the cash. My builder is happy to do it in small stages as he is fully booked up with big jobs anyway - this way he can fit my jobs in around the big paying ones and keep my costs as low as possible.

Basically I need to work OT to pay for my garage build. If I do go for some form of credit it will be no more than £2-3k to keep any repayments low and short-term.

 

[slickscustoms]

WOW! lots of good info here guys thanks. i know paying as you go is the smartest way to go about building but i dont want a shop that is stretched out 5-10 years in the making. : ) its gonna be about 1 year till i'm debt free minus the house and thats when i plan on getting serious about my shop. so till then i just need to save save save. thanks alot guys, i didnt mean to get personal but was just wondering. thanks!!!!