Financing a new barn?

[MossRoad]

I'd be really surprised if you can find someone to lend you $50K for you to purchase building materials to put up a barn yourself, when you don't have enough equity in your home to cover that large of a loan. Once you put an outbuilding on a piece of property that already contains a house, the whole property, house+land+outbuilding are tied together as one property.

So, for example, if you have a $100K house that you have $25K in equity, you own 25% of that house.

So now you add $50K worth of barn (just as an example) and you now have a piece of property worth $150K that you only have $25K in equity... you now only own about 17% of it.

Most lending places want 20% (at least) down on a farm property. You'd be under that and therefore, won't qualify for a loan. And that's just if you figure the property value. They're gonna want to look at all your debt (if you have any), like car loans, tractor loan, student loan, credit card, etc....

Anyhow, the only reason a lot of us are commenting on not taking out a loan is because we are mostly a frugal bunch, and worry for other people's financial peril, from observing past experiences of our own and others. No one's trying to poke you (although I can see how it might seem that way). We just want to offer sound advice.

Good luck finding a way to finance it, if your choose.

 

[mopardude318]

I dunno....Everything I've ever owned, I've financed. my vehicles, motorbike, OHV's, tractor...I take advantage of the Home Depot credit card offers 0% for a year, and buy my tools and building materials that way, and pay those off before the years end. ..I have close to an 800 credit score, financing became easy. LOL. but im probably doing it wrong, and hopefully it won't bite me in the a** one day. I have alot to learn. Stay healthy.

I'm lookin to get a small loan for a shed I want to build, but I like the recommendation of building it in stages and paying for it without having to finance. save a little, build a little, save a little more, build a little more.

 

[Sigarms]

Hey now,, My wife drives a KIA.:thumbsup: They have some Kia's that cost as much as some of the Mercedes models

Why I never buy a new car.

To the OP, apologies, I don't have an answer for you.

Edit - after reading this

I agree - 40x60 doesn't seem right in my head. I think it was the 60x80 with an attached 20x40 living area with an overhang porch around the living area. Not a pole barn, all materials, electrical, HVAC (living area), concrete, doors, lighting and completely finishing the "living area" to be like the house. Also included some concrete approach from the driveway to the barn.

I can't help but think that perhaps your not just looking for a barn of some sort for storage from the elements, but something much more.

 

[deezler]

To the OP:

Some financial institutions will not charge you for the appraisal work if you never end up closing on a loan. Find this out up front, and then why not give it a whirl. Appraisals can be allll over the place, we've had up to a $90k (~30%!) difference is appraisals for our new home.

If they are willing to work with you, Greenstone Farm Credit up in Monroe, Michigan might be a good place to check out. They specialize in farm loans and vacant land, etc.

We bought our vacant land with them, and did our construction loan with them too. Great to work with. But when I tried one more time for get a 2nd mortgage or home equity line of credit to build my pole barn, their selected appraiser at that time couldn't give a darn, and just phoned it in, resulting in a total lowball estimate, no equity, and that was that. So I went to a local credit union next, and then we easily had more than enough equity for a $25k barn loan. You gotta shop around sometimes. Also, you can really work over the appraiser (polite chatting, highlight all positives, write them a letter, etc) to get a more beneficial result.

Of course, this is all assuming you are very confident in your income and ability to cover the extra payments. If you're not sure, absolutely wait until you are.

 

[1stDeuce]

My suggestion is to pay off everything you currently owe as fast as you can, excepting perhaps your mortgage. (But I would also suggest putting an extra $100 or more into each mortgage payment, against the principal...) When you're down to just the mortgage, put whatever was going to pay down other debt into a savings account and let it build for a year. It might take a few years to get your barn, but when you do, you'll be much better off than if you get some creative financing to make it happen now.

You might also consider why exactly you need a huge barn with living quarters when you already have a house... Get realistic with your needs for inside storage, since your crap will expand to fill the space available... How much stuff do you really need??

So here's the plan my wife and I are currently on... We bought property a year ago for $50k with $20k down. We got a short term land loan through the same bank that we'll be using for a construction loan next spring. Since buying, we've put in a driveway, cleared some trees, and we are now building a 34x48 barn with 12' lean-to's on both sides that we can put our home on wheels in for the winter...

We had about $20k saved up when we started the barn project, and it's been about 5 months of building, with just the two of us doing the work for the most part. We both work full time, and we have no loans aside from the property loan. We have been buying material for cash, and putting it up, then buying more.

We're to the point of getting the last of the metal roof on now, then we'll close it in, and then pour concrete, I hope... Sounds like we're almost done, but with only the two of us working, and mostly on the weekends, it'll take some time...

I expect when it's finished, we'll have about $25k into it. But we won't owe anything, and we'll have closer to 50% equity in the property. In the spring, we'll start on a garage/apartment with a construction loan, and when it's done, we should have a ~$60k mortgage on a ~200k property. We should be able to pay that down in less than three years, and once we hit that mark, we'll build a proper "house" if we still like it here.

Good Luck!!

 

[fried1765]

Doesn't address my question but thank you for your thought.

Oh, but "Steve" does address your question.
At this point in time, you cannot afford to build the barn you want.

 

[cold1313]

To the OP:

Some financial institutions will not charge you for the appraisal work if you never end up closing on a loan. Find this out up front, and then why not give it a whirl. Appraisals can be allll over the place, we've had up to a $90k (~30%!) difference is appraisals for our new home.

If they are willing to work with you, Greenstone Farm Credit up in Monroe, Michigan might be a good place to check out. They specialize in farm loans and vacant land, etc.

We bought our vacant land with them, and did our construction loan with them too. Great to work with. But when I tried one more time for get a 2nd mortgage or home equity line of credit to build my pole barn, their selected appraiser at that time couldn't give a darn, and just phoned it in, resulting in a total lowball estimate, no equity, and that was that. So I went to a local credit union next, and then we easily had more than enough equity for a $25k barn loan. You gotta shop around sometimes. Also, you can really work over the appraiser (polite chatting, highlight all positives, write them a letter, etc) to get a more beneficial result.

Of course, this is all assuming you are very confident in your income and ability to cover the extra payments. If you're not sure, absolutely wait until you are.

Thanks for the recommendation! I looked at their website, not far from me and appear to be like my local Ag Credit but larger.

 

[Phillip w]

As mentioned a pole barn company can work with you and put the barn up as a package deal relatively reasonable. You can finish the barn as you go like running water to it, concrete floor, hay loft, etc. As far as financings, if you refinance you property, the barn should increase the value of the property. Any financially set relatives??? My father financed a barn using my grandfather as the banker. I have a car loan and credit cards, but I use my father as the banker on certain items. He financed my tractor and I got him played off now.

 

[Juiced06GTO]

I was convinced that after my now wife and I purchased our house 8 years ago I would have my garage/barn up within the next year as I am a big car enthusiast and am always working on them. Fast forward 8 years, i am 34 and it still hasn't been built! With two kids and another on the way now the biggest issue is time for me to build it. I'd need 150K in this area to have one built for me and even though I know I can save that kind of money in time, the priorities have changed into saving for things like daycare/college/early retirement etc. My number one priority now is paying off my house and trying to move family closer so I wont have to pay $2600/month in daycare for the next two years!!

As for advise, I went through the exact same steps you are going through. I had plans drawn up and even spent about $1500 getting a variance from my town so I could erect the building closer to the lot line. In the end, the financing options out there would have done much more damage to my future financial situation than I wanted and the benefit of having the garage was just not worth it to me.

 

[rustyshakelford]

I was convinced that after my now wife and I purchased our house 8 years ago I would have my garage/barn up within the next year as I am a big car enthusiast and am always working on them. Fast forward 8 years, i am 34 and it still hasn't been built! With two kids and another on the way now the biggest issue is time for me to build it. I'd need 150K in this area to have one built for me and even though I know I can save that kind of money in time, the priorities have changed into saving for things like daycare/college/early retirement etc. My number one priority now is paying off my house and trying to move family closer so I wont have to pay $2600/month in daycare for the next two years!!

As for advise, I went through the exact same steps you are going through. I had plans drawn up and even spent about $1500 getting a variance from my town so I could erect the building closer to the lot line. In the end, the financing options out there would have done much more damage to my future financial situation than I wanted and the benefit of having the garage was just not worth it to me.

Just wanting to make sure that wasn’t a mistype...you said you’ll be paying $2600 per month for child care for 3kids?

Brett

 

[Juiced06GTO]

Not a mistype......I could buy a nice second house for what we are paying. My wife works in the school system so we only have to pay for 10 months of care, but its going to be $26,000 after taxes for 10 months of daycare. If she didn't have a pension and professional status she would be better off staying home, but it would kill her career and retirement if she left to raise the kids full time. So instead we devote pretty much her entire pay check to daycare for the 7 years that the kids are in it.

 

[Redlands Okie]

Long range planning and pay off that some do not understand. Congrats.

 

[Phillip w]

Not a mistype......I could buy a nice second house for what we are paying. My wife works in the school system so we only have to pay for 10 months of care, but its going to be $26,000 after taxes for 10 months of daycare. If she didn't have a pension and professional status she would be better off staying home, but it would kill her career and retirement if she left to raise the kids full time. So instead we devote pretty much her entire pay check to daycare for the 7 years that the kids are in it.

With those expenses, glad I don't live in the ne. I will stay in the Midwest were things are sti'll reasonably affordable.

 

[MossRoad]

Back in 1992 daycare was $110 per week for one kid. By 1997, it was $219.10 per week. I'll never forget that number... $219.10. Today, you're luck to find it for $150 per week. So, $150 per week is $7800 per year. Times that by 3 kids... is $23,400 per year.

We were lucky in that my wife had cafeteria style benefits. I covered the kids with insurance and she got to cover herself and use the rest towards daycare, so one of the kids was payed for almost completely by her insurance benefits.

 

[MossRoad]

With those expenses, glad I don't live in the ne. I will stay in the Midwest were things are sti'll reasonably affordable.

Have you priced full-time daycare in your area lately? I'd be curious to see how it compares.

 

[TheMan419]

Back in 1992 daycare was $110 per week for one kid. By 1997, it was $219.10 per week. I'll never forget that number... $219.10. Today, you're luck to find it for $150 per week. So, $150 per week is $7800 per year. Times that by 3 kids... is $23,400 per year.

We were lucky in that my wife had cafeteria style benefits. I covered the kids with insurance and she got to cover herself and use the rest towards daycare, so one of the kids was payed for almost completely by her insurance benefits.

$200/wk per child is not a bad rate in South Bend. So a bit over $600/wk for 3 kids.

 

[MossRoad]

Ouch! I wish my income would have increased the same % as daycare costs. :laughing:

When we thought about it, we figured it this way...

Drop the kid off at 7:30am and pick her up at 5:30.
10 hours per day at 5 days per week is 50 hours.
$110 per week divided by 50 hours = $2.20 per hour.

$2.20 per hour seems cheap for childcare when you think about it.

So now its $200 per week, for 50 hours and that's $4.00 per hour. Still seems cheap. But if you're a young couple starting out, and you have two or three kids... yeowch! That's expensive.

So, you hope that you can maintain your job and benefits and pay raises while your kid(s) is(are) in daycare until they can enter pre-school.

We were lucky that our kids went to all-day pre-school, and kindergarten, with a latchkey program after school.

When we add it all up, for us, it was this:

$5500 per year daycare for 5 years = $27,500
$3500 per year P-8 for 10 years = $35,000
Summer care P-6 $100 per week for 11 weeks = $1100
High school averaged $6000 for 4 years = $24,000.

So righ there we have about $88,000 per kid, so about $178,000 to get them through high school.

Oh, you have to feed and clothe them, too. And sports gear.... yikes! :laughing:

 

[Juiced06GTO]

Sorry OP, didn't mean to derail your thread. I just remember doing the same exact research a few years ago. Morton's does offer financing if you have them come in and build it. I was quoted about 60k up this way for a 40x60 insulated, no floors, no utilities.

As for the off topic stuff, it is crazy how expensive things are for a family starting out. My wife and I do fairly well financially but I still struggle to put away as much as possible for the future. Once that is all done there isn't much left over for fun stuff!!

 

[TheMan419]

Sorry OP, didn't mean to derail your thread. I just remember doing the same exact research a few years ago. Morton's does offer financing if you have them come in and build it. I was quoted about 60k up this way for a 40x60 insulated, no floors, no utilities.

As for the off topic stuff, it is crazy how expensive things are for a family starting out. My wife and I do fairly well financially but I still struggle to put away as much as possible for the future. Once that is all done there isn't much left over for fun stuff!!

We put up a 36x72, no floors or utilities for $25K or so. 10 foot to the trusses. Not sure that Morton or FBI or the "big boys" are worth the extra cost. They would have been $50K or more.

We saved quite a bit of money by hiring out the electrical and plumbing on our own rather than having the building contractor do it.

 

[fried1765]

Sorry OP, didn't mean to derail your thread. I just remember doing the same exact research a few years ago. Morton's does offer financing if you have them come in and build it. I was quoted about 60k up this way for a 40x60 insulated, no floors, no utilities.

As for the off topic stuff, it is crazy how expensive things are for a family starting out. My wife and I do fairly well financially but I still struggle to put away as much as possible for the future. Once that is all done there isn't much left over for fun stuff!!

It is shocking how barn prices have changed.
I had Morton erect a 36 x 48 building (no insulation) 33 years ago.
Building is on the Cape, not so far from Sutton, Ma.
The Morton cost then was just under $10,000 ($5.80/sq.ft.)
Your Morton price now.... $60,000 ($25/sq.ft.)
....and I thought inflation was under control.
That said: Morton was a SUPERB company to deal with, and my Morton steel building (1/2 mile from salt water) is still in excellent condition.