Shop Financing.
- Thread starter coodiny
- Start date
ddawg16
Well-known member
Pay as I go.
If you have to 'finance' it, unless it's to run a business, you most likely can't afford it.
I saved up money.....used the **** out of my CC's. All told I have about $30k into my garage. And the CC's are paid off.
Did the same with my house addition....except in that case I borrowed against my 401K....works great because you actually end up paying yourself back....with interest.
Hence....the $80K I spent on my 2-story addition increased the value of my house about $200K......it's kinda nice having about $400K in equity in my house....
Your other option...Home equity loan.
If they won't give you one....then you can't afford the shop
If you have to 'finance' it, unless it's to run a business, you most likely can't afford it.
I saved up money.....used the **** out of my CC's. All told I have about $30k into my garage. And the CC's are paid off.
Did the same with my house addition....except in that case I borrowed against my 401K....works great because you actually end up paying yourself back....with interest.
Hence....the $80K I spent on my 2-story addition increased the value of my house about $200K......it's kinda nice having about $400K in equity in my house....
Your other option...Home equity loan.
If they won't give you one....then you can't afford the shop
cj7jeep81
Well-known member
We did a home equity loan and cash for ours. I could have waited another 5 or 6 years and paid cash, but we can afford the payment, and the value I get out of using it for 5 or 6 more years is well worth the 3 or 4% intrest I'm paying. I think we did a 10 year loan, but will have it paid off in about 6.
Think that was about $30k to get the building built, then paid for the concrete the following year. Have been working on finishing out the inside ever since, and just pay as I have the extra cash.
Think that was about $30k to get the building built, then paid for the concrete the following year. Have been working on finishing out the inside ever since, and just pay as I have the extra cash.
chaosracing
Well-known member
We are doing a combo of home equity line of credit (similar as a loan, except I only pay back what I need to borrow, not just a lump sum, and I can borrow up to my limit over 10 years and have 20 to pay back) and cash. I paid my deposit in cash, will pay the bulk in line of credit, then final payment in cash. Just kind of worked out that way for us. If I had known prices would be up this high from when we bought our house in 2005, I would have built sooner. Longer you wait, the more it costs.
I am only building a shell and having floor poured. Then as I can afford it in cash, I will run electric, insulate and finish inside.
I am only building a shell and having floor poured. Then as I can afford it in cash, I will run electric, insulate and finish inside.
Moose97
Well-known member
I built the slab I could afford to build about 7 years ago. Built the shop about 5 years ago. Ran electricity about a year later. Now the shop is too small so I'm saving up to build an attached area for overflow stuff. Also adding some more concrete. It's not perfect and it's not some of these taj-mahal shops you see but it's functional and it's mine. Pay for what you can when you can. Do yourself what you can. Plan on additions if you need too. Like others have said if you can't figure out how to pay for it you probably can't afford it.
nelstomlinson
Well-known member
Cash or do without, for home and shop.
James-W
Well-known member
Paying cash is not always your best option. A lot of people take out a mortgage on their home. You can get a mortgage with a pretty cheap interest rate these days and you can deduct the interest from your income taxes, at least I think you still can. I am not certain about that though, the new tax laws may have changed it.
In any case, if you have investments you need to get serious and do the math of the interest you get versus the interest you will pay. You can't just do the initial interest comparison, you need to do the interest comparison for the whole term of the loan and see how it works out. I have found most times it works out financially better if I borrow the money and make payments.
In any case, if you have investments you need to get serious and do the math of the interest you get versus the interest you will pay. You can't just do the initial interest comparison, you need to do the interest comparison for the whole term of the loan and see how it works out. I have found most times it works out financially better if I borrow the money and make payments.
oilslick
Well-known member
Don't wait till you are to old to enjoy it.
Stuart in MN
Well-known member
I used a line of credit account.
tom-ky
Well-known member
Honestly it doesn't matter what anyone else has done. It is your money and your life, do what fits you. Ultimately it is you that pays the price whether it is all up front or in payments. Nothing wrong with using credit responsibly and nothing wrong with saving up to pay for something either. You have to weigh the pros and cons and decide what fits you.
chaosracing
Well-known member
Thats why we went with a line of credit, you could use the interest to deduct from income taxes. However (which turns out to be better for most) the tax laws changed. I talked with my tax guy and for a married couple the standard deduction was changed to $26,000. So unless combined (mortgage interest, state and local taxes, donations, etc) you have enough deductions to exceed that $26,000, you no longer can use mortgage interest for deductions.
Like I said, though, for alot of people its better. Our combined deduction this past year was around $15,000 so we will make out better.
Miss the Pontiacs
Well-known member
Saved up, sold a couple of toys. Can’t write it off so taking out a loan the additional interest costs were well extra. But would have enjoyed the shop earlier a couple of years earlier by taking out a loan/line of credit.
Musicinabottle
Banned
- Joined
- Jul 24, 2016
- Messages
- 3,371
I built my 3 car garage / shop for free, but then it kind of looks like it too!
Mikeske
Well-known member
I had a plan and went with it. I started with locating property that had waters electric, septic in, and phone service and this was what I could afford and since my wife and I had only 1 child who left when he was 18 and went in the military we started and used the manufactured home we had on another property. We sold the property the manufactured home was on and we had our new property where we placed the manufactured home.
I started out with a 15 year plan and the new property already had the shell of a 28 X 48 building already on it. No cement on the floor and for some strange reason the prior owner never cut a driveway in, which was the first improvement I did to the property and had a driveway cut into and connected to the existing driveway 80 feet away. Well that works for us and we proceeded.
Thats when I started to work all the overtime I could and we our property with the manufactured home paid off in eight years. I continued to do the all the overtime and then stash the money into a savings account as we really wanted a taller building to house our RV. The steel building was not tall enough to house the RV. This took until 2009 to have enough money to build the new garage. The new garage was a pole building but instead of steel siding we had cement board on the exterior and they I proceeded and wired the building as I had the rough in before the cement was poured.
In 2010 I had saved more money and had the roof replaced on the manufactured home and had the steel pole building cement pour in it so I had a level dried in area that was my dedicated shop area.
The following year I had a pole building style car port and pole style awning down the front of the manufactured home. I just continued on the yearly updates and had a 6 foot wide porch put down the front length of the manufactured home and the final year I had a 8 foot wide cover deck down the length of the back of the manufactured home with it extending down the back of the car port.
Lat year I finally retired and I had done everything with cash, I just prefer not to deal with a bank for doing improvements as sure I could have enjoyed having the improvements sooner but when you are debt free it is the a funny thing in how liberating it is. I know that doing the way I did it was hard but I can tell the bank thank you for the short term loan and I have the freedom to enjoy my home and shops.
I started out with a 15 year plan and the new property already had the shell of a 28 X 48 building already on it. No cement on the floor and for some strange reason the prior owner never cut a driveway in, which was the first improvement I did to the property and had a driveway cut into and connected to the existing driveway 80 feet away. Well that works for us and we proceeded.
Thats when I started to work all the overtime I could and we our property with the manufactured home paid off in eight years. I continued to do the all the overtime and then stash the money into a savings account as we really wanted a taller building to house our RV. The steel building was not tall enough to house the RV. This took until 2009 to have enough money to build the new garage. The new garage was a pole building but instead of steel siding we had cement board on the exterior and they I proceeded and wired the building as I had the rough in before the cement was poured.
In 2010 I had saved more money and had the roof replaced on the manufactured home and had the steel pole building cement pour in it so I had a level dried in area that was my dedicated shop area.
The following year I had a pole building style car port and pole style awning down the front of the manufactured home. I just continued on the yearly updates and had a 6 foot wide porch put down the front length of the manufactured home and the final year I had a 8 foot wide cover deck down the length of the back of the manufactured home with it extending down the back of the car port.
Lat year I finally retired and I had done everything with cash, I just prefer not to deal with a bank for doing improvements as sure I could have enjoyed having the improvements sooner but when you are debt free it is the a funny thing in how liberating it is. I know that doing the way I did it was hard but I can tell the bank thank you for the short term loan and I have the freedom to enjoy my home and shops.
I always approach major purchases with a "worst case" mindset. In the case of something like financing a building with a HELOC (Home Equity Line of Credit), the "worst case" is you default and the bank forecloses on your home. You'll have to determine for yourself how likely that scenario is based on your mortgage payment, what the HELOC payment would be, how much you'd spend on the building, your overall financial well being and probably your job security. Personally, I'm not willing to gamble with the roof over my head just to have a place to keep some toys so the shop is paid for in cash as I can afford it.
As stated, home equity is an option. When I did mine in 2015, I ended up doing 2 different personal loans. One secured (24k) one unsecured (16k). Have one already payed off, and about half of the other. Admirals bank is who I used, they were great to deal with.
I have just been putting all my extra money towards paying off the loans, and in another six months I should be done
I have just been putting all my extra money towards paying off the loans, and in another six months I should be done
did u finish the inside with that or just the shell
Sent from my SAMSUNG-SM-N920A using Tapatalk
firebirdparts
Well-known member
Hobby shops are not worth anything, so you can't use them as collateral very successfully. You need to include them when you finance the house, or pay cash.
tjnsn
Member
that is what my dad always told me when I would ask him about a project or purchasing something through the years. I went with a home equity line of credit and a five year payoff plan.
rburke65
Well-known member
Yes I waited too long. Should have built mine ..?.. 20 years ago ..at ..?..45 yo or so.
JCQuick
Well-known member
I used money I got when my mom passed away
If you are young, in a home that you plan on living in for a long time (forever home), can get a home equity loan/LOC with a good interest rate and can afford it, I say why not borrow to build what you want.
It would **** to save your cash for years, doing without a shop or enjoying it, only to never see it come to fruition.
In the end, you can get a ton of advice from members here but only you know your financial well being and can the correct determination.
It would **** to save your cash for years, doing without a shop or enjoying it, only to never see it come to fruition.
In the end, you can get a ton of advice from members here but only you know your financial well being and can the correct determination.
Parrothead
Well-known member
When it comes to historical low interest rates, it’s often NOT better to pay cash. You should be killing that with good investments. Consult your financial advisor for details.
That got me the entire shell, concrete, 2 water lines and electric ran from my house out to the shop.
I will be finishing the inside with cash as I go
the other side of that coin...........smart money says never never ever go in debt for toys and a hobby shop is the ultimate toy.
Garagetime
Well-known member
Sold my pickup for slab money. The rest I payed as I went. Things were tight I have about 16,000 into it at this point. My friend and I did all the work other than the slab I did hire it done. I still got to do paint,trim and roll up door.
This is a perfectly reasonable approach if you have the funds to cover a large purchase up front, and want to finance it to keep your funds invested and earning more. That's not a common scenario though, when nearly 60% of American adults would struggle to pay a surprise $500 expense.
The fact is, the majority of people that finance large purchases do it because they see it as the only way they'll be able to have the expensive thing that they want. For those people, it's not a good financial decision, it's just risky and expensive instant gratification.
Hopefully OP is in the first category and not the second, because going into debt for a luxury item that wouldn't otherwise be affordable is the kind of decision that keeps poor people poor.
rburke65
Well-known member
It depends on the individual person and their comfort with borrowing I guess. I waited, wrote the check after I retired, and finished it interior myself.
Last edited:
Parrothead
Well-known member
James-W
Well-known member
I agree, but that isn't what we are talking about. We are talking about people paying cash for stuff rather than getting a loan and making monthly payments. Sometimes paying cash is the best financial decision, many times it isn't.
Automobilist
Well-known member
I used to be part of the "finance it at a low rate and invest at a higher rate" group...
I told myself that, so I could justify buying things before we could really honestly afford them.
As I got older and accumulated more and more assets, I figured out that for us, that lifestyle was not as beneficial as we originally thought. Here's why: in simple terms, about every dollar of interest "write-off", equals about 30% or $0.30. So, when we had a $5200/month house payment (including a HELOC to buy toys...) our true tax benefit was around $1,600/month. A little went to principal reduction, but the bulk was simply money gone. On the flip side, much of our "investment" funds went into retirement plans. That grew over the years, and now we should be able to retire any time and maintain our current lifestyle. Those after-tax dollars that could be "invested" were and are taxed at around 30% on their realized gains. Mostly I consider those funds as an emergency fund, about 18 months of living expenses available.
So: you pay interest which is partially deductible and invest the cash which is fully taxable. Or, you wait until you can pay for the toy, be it a fancy car, RV, airplane, or shop.
We choose to pay cash for everything these days. Besides having a small mortgage on our expensive home. The boats, motorcycles, daily driver cars, vintage sports cars, vintage race cars, shop, all of it is paid for, with ZERO payments.
Also, keeps the stress level low. No big payments to worry about. No worry of losing a job. No worries of an investment tanking. No worries of enjoying retirement whenever we choose to.
Sure, this will be interpreted by some as "preachy". Who cares... You may manage your financial life as you choose. Just remember YOU own it. It's your own fault if you screw up and have to work til you die. It's your success if you play the game well and end up having all you want, and then some.
Your choice.
I told myself that, so I could justify buying things before we could really honestly afford them.
As I got older and accumulated more and more assets, I figured out that for us, that lifestyle was not as beneficial as we originally thought. Here's why: in simple terms, about every dollar of interest "write-off", equals about 30% or $0.30. So, when we had a $5200/month house payment (including a HELOC to buy toys...) our true tax benefit was around $1,600/month. A little went to principal reduction, but the bulk was simply money gone. On the flip side, much of our "investment" funds went into retirement plans. That grew over the years, and now we should be able to retire any time and maintain our current lifestyle. Those after-tax dollars that could be "invested" were and are taxed at around 30% on their realized gains. Mostly I consider those funds as an emergency fund, about 18 months of living expenses available.
So: you pay interest which is partially deductible and invest the cash which is fully taxable. Or, you wait until you can pay for the toy, be it a fancy car, RV, airplane, or shop.
We choose to pay cash for everything these days. Besides having a small mortgage on our expensive home. The boats, motorcycles, daily driver cars, vintage sports cars, vintage race cars, shop, all of it is paid for, with ZERO payments.
Also, keeps the stress level low. No big payments to worry about. No worry of losing a job. No worries of an investment tanking. No worries of enjoying retirement whenever we choose to.
Sure, this will be interpreted by some as "preachy". Who cares... You may manage your financial life as you choose. Just remember YOU own it. It's your own fault if you screw up and have to work til you die. It's your success if you play the game well and end up having all you want, and then some.
Your choice.
Last edited:
I get it. That approach is fine if you have the cash available, understand the math, and are willing to take on some risk for the prospect of higher returns. How many people fit that category though?
If an average shop costs $30-60k, what percentage of the population will be able to pay for that at once? From those few people that actually have the money, what percentage are willing/able to deal with the additional stress of financing/investing instead of just having the thing paid for? You're completely right that it can, and probably will work out better to finance and invest but that approach only works for a pretty small segment of the population. For the rest, financing a shop build is not a wise financial decision, or comes with too much risk. Using a house for collateral, or taking the funds from retirement savings just compounds the risk.
Last edited:
morrillm06
Well-known member
I got a 10k personal loan for the concrete, then paid out of pocket for the rest, it took me a year and a half to finish it but it was weathered in before winter so it didn't bother me. it was worth the extra time to not have 40k in debt
I think most financial institutions, atleast around here in a rural area, will only finance something like for either 7 or 10 years.
Do you have land ? If so, is it developed ? Do you need a well, septic or other utilities ?
Do you have any type of plan ? Doing this in steps, buy land/pay off. Get utilities in order and in place. Get loan for structure and have it put up. Then finish inside yourself, paying as you go.
I have 3 acres thats paid for as well as water and electric already there. It use to be a mobile home on the property
Sent from my SAMSUNG-SM-N920A using Tapatalk
Then I would make my next step to talk to a local bank, loan company or credit union that you already do business with. Talk to them about your plan and what they will or will not do. Once you know that, you can decide how to proceed or what you'll have to pay for out of pocket.
Can I ask what the appeal is for you? I'm genuinely curious about your motivations for using a "barndominium" as a primary residence. Around here, people would build "barndominiums" because they were taxed as barns instead of living structures, and had much lower property tax rates as a result. But local governments wised up to that pretty quickly, and I think that advantage is mostly gone now.
It seems like anything you could do in a barn home you could also do if building a more traditional house. Is it significantly cheaper per sqft vs building a standard home? Pole barns are popular because they offer more space for less money than stick built structures, and they can be built faster. Once you start finishing them out, to the level of a house, I wonder if it's any cheaper though.
Is resale a concern, because selling a barn home might be more difficult than a normal house.
What about longevity? Pole structures can last a long time with thought and proper design, but you're going to pay more to make it last 50+ years. That might be an ok sacrifice for a garage or woodshop, but is that ok for a house?
Lastly, is the financing issue. Fewer lenders will be available to you, and I'd guess that they'll want higher interest rates for their effort. Have you done any math to see how the money plays out, not just for construction costs, but financing as well? Are insurance costs different than a traditional home?