Grassroots Homeownersports: Return on investment on building a shop

My fiancee and I have been preapproved for a mortgage and are actively trying to find a house. We're looking for something with at least a 2-car attached garage for me and some separate crafting/woodworking space for her. Ideally, of course, I'd like to find something with a giant detached shop (actually did find one, but the house was meh and they seemed to be pretty high on their price.

I'm also going to have access to a large sum of cash that I could, hypotethically, use to build a shop next to whatever house we buy. This hypothetical shop could take one of two forms - in town, it'll most likely be a large two car (roughly 24x30) frame building with shingles and siding. If we go out of town, it's more likely to be a 30x50 frame building with metal roof and sides, three stalls. I have faith that I can build either of those by myself (with help from my dad) and only farm out concrete and some of the electrical work. Would probably spend 20-25k in either case.

So, what kind of effect on the value of the house would this have? I've found some general numbers on cost vs. value, but they seem to be assuming it will cost $50k to build the garage (and will increase value by about 60% of that). FWIW, real estate in our town is pretty cheap compared to the national average....here's a house in our price range we are looking at tonight.

House

Curious to hear the hivemind's thoughts and experiences.

A realtor in your town could offer you much better info than anyone here.

I did pretty much exactly what you are suggesting (option #1). My shop (built to look like a nice neighborhood house, including dormers) is 30x40 and cost me about $33,000.

I am quite certain that my shop adds exactly zero to my property value.

It MAY be more appealing to a FEW buyers (who actually want a shop), but it DIMINISHES value to anyone who doesn't want a building like this.

I had an appraiser look at the property once. He told me the shop added no value to the property, because the interior walls were not sheetrocked.

In the process of buying a house that has a shop out-building. As far as the appraisal went, it was seen as almost a non-entity. Pretty much none of the comps they used had anything similar. In talking to our realtor, she said that it isnt seen as a major selling factor and it can take longer to find a sale on one as you need the "right buyer" who seeks it out. That right someone is most of us on here, but not most of the population.

(and this is an outbuilding with sheetrock, heat, and AC in my case)

I think what you will find generally is that if you are building your property in keeping with neighboring properties, you will add value. If you have an odd duck that is different than everything else in the neighborhood, you are the only one who cares.

So, for example, if you buy a property with no shop in a neighborhood that has a lot of garages/ shops and add one, you will bring it up to the caliper of the neighborhood.

But if you live somewhere where the neighbors have no outbuildings and build the garage-mahal, you get a big goose egg (like me).

Our realtor has been a great and knowledgeable help with every other question we've asked her, but she's not got a lot of good advice on ROI regarding a stand-alone shop building.

This will be (eventually anyway) finished inside with either sheetrock or OSB, electrified, lit, and heated and cooled. Plumbing is really unlikely.

A friend just bought a house with a really nice detached three car with a full apartment above it. The whole building was valued like a regular three car garage, and the apartment was ignored. Sucked for the seller who thought they had another 800 square feet of living space someone was going to pay for. Worked out well for my friend who now has a separate building for his in-laws to stay in.

Thread is relevant to me, planning on teardown and rebuild soon. 'They' say a new garage can only improve property value.

An old falling down garage is a negative to property value, so yes, a new building is certainly a plus.

I'll bet this is like a pool. To those who want a pool, not having a pool is a huge turn off. Having a pool isn't really a big boost in value, but conversely having a poorly maintained pool is a huge detriment to value.

An outbuilding may not increase your resale value, but a stand-alone rentable apartment sure could. If you ever do build a shop, and are hoping for compelling ROI, then stubbing for a bathroom and kitchenette is thinking forward. Design your workshop so that it could be repurposed and it becomes an asset instead of a liability.

We are refinancing right now, and the appraiser was just here earlier today. He looked out the back window at my pole barn, asked me how big it was, and wrote something down. So I have to think it makes SOME difference. But it's not like he went inside and inspected it or anything.

Perhaps I have a skewed view, but I look at it as the land is an appreciating asset. Buildings are mostly depreciating assets where you might recover a percentage of the investment. Any ROI would more likely be from a business in the shop instead of the building. Put up a shop because you want one, not because it's an investment. Hmm, kinda like an old car.

Fueled by Caffeine wrote: I'll bet this is like a pool. To those who want a pool, not having a pool is a huge turn off. Having a pool isn't really a big boost in value, but conversely having a poorly maintained pool is a huge detriment to value.

Pools have the added fun of possibly making the property un-insurable. The house we are getting has an above-ground with a removable ladder and it was a disqualifying feature with many companies as there isnt a fence.

Do not forget that any increased value to the home eventually gets reflected in the property taxes.

And depending on the design, the increased cost of insurance may be just more or a lot more.

The more I think about the "home ownership dream" the more I think it's not actually mathematically correct. Heck the idea that land by itself appreciates implies that the desire of that land increases over time- which it may or may not. My inlaws bought property that has turned out to be a total bust, as nobody wants it.

Anyway, for this exercise- don't think of the shop as an investment for money. It's also an investment for your pleasure. So some of it's practical, better vehicle storage. Some of it is fun work place to spend time. You don't buy really good woodworking tools to sell at a profit- you get them for fun. Just like this. If it makes YOUR life better, it's worth it.

oldtin wrote: Put up a shop because you want one, not because it's an investment. Hmm, kinda like an old car.

Agreed. Problem is that it doesn't make financial sense for me to spend $20k (and many, many weekends) on a shop for a house that we will likely only live in for 4-7 years, if I'm going to get none of that money (or next to none) back. I'd rather spend it on 2/3 of a Viper.

There is a parallel discussion on this subject going on right now over on the Garage Journal forum. As mentioned above, it depends on your neighborhood - if all the other houses have large shops or storage buildings, it probably adds value. If none of them do, it probably takes away value.

psteav wrote:

oldtin wrote: Put up a shop because you want one, not because it's an investment. Hmm, kinda like an old car.

Agreed. Problem is that it doesn't make financial sense for me to spend $20k (and many, many weekends) on a shop for a house that we will likely only live in for 4-7 years, if I'm going to get none of that money (or next to none) back. I'd rather spend it on 2/3 of a Viper.

sure about that? I thought that, too. I've lived in the same home since 1993. Not likely to leave for at least another 15 years, now... Maybe not ever. Which means that whatever I spent on the house becomes 100% for pleasure, as I may never realize the increased value of the home (other than the higher taxes and insurance).

In reply to alfadriver:

Not at all sure about that. Life is weird. I definitely DON'T want to overspend on a house/improvements/renovations and then have something happen in five years requiring a move, though.

In reply to psteav:

Just got to be aware that "what if" too much will paralyze you from doing anything. And based on two recent deaths here at work, that's something one should never, ever do.

Again, think about it as a new car- spend $20k now, and 5 years from now, it may be worth $5k. But as long as it does it's job and you are happy, nothing wrong with that. If you get 15 years out of it, and it's then worth less than $1000, you got even more out of it. I'm pretty sure that spending $20k on your home isn't going to just add $5k, though- more likely just to break even over 5 years.

Spending money on something that makes you happy isn't a bad thing.

Penny pinching that prevents that is a bad thing.

Just have to be reasonable in the amount.

When you go to sell and price the shop into your asking price, someone will come along and say you're asking too much and the house is meh.

Seriously, an appraiser will give a value to an outbuilding, but it generally won't reflect the quality of construction or the amenities inside. For example, when I sold my home with the 30x40 foot three car garage/shop with A/C and sheetrocked walls, etc., etc., the appraiser valued it all as just a garage. Now, it did help me sell it in a down market because the guy buying it really wanted that shop. The lift even became a point of negotiation.

Well our recent experience with selling our house with a 2 car attached garage and a 2 car-ish 20x30 detached garage was different than most of the above comments. Everyone that came and looked at our house before it sold in 7 days was keenly interested in the detached. We probably had 30 showings all together. I am not saying that the garage sold the house but it was definitely seen as a bonus by all prospective buyers.

It will probably depend on your total # of bedrooms/bathrooms, general house conditions, what is available and what the lot sizes are moreso when you go to sell.

My shop cost me 30K to build. Would have cost double that if I paid someone to do it. Adds maybe $10K to value, but costs me taxes on an extra $25K improvement. Its worth every penny. I'd build another one if the town would let me.

I'd come down on the side that it tends to either be a plus on value or at least get you a quicker sale.

Unless, come time to sell, it hasn't been prepped to show and is packed to the rafters with crap-- then it's a huge negative.

I think it's hit or miss depending if you can find someone who loves your house and wants a shop. I think it's more likely to be a miss, as the average person doesn't care much about a shop.

I'm thinking of adding a shed/garage, and think it may detract from the value of our house more than add to it. With that being the case, I don't expect to recoup any of the cost when we go to sell it.

nderwater wrote: An outbuilding may not increase your resale value, but a stand-alone rentable apartment sure could be. If you ever do build a shop, and are hoping for compelling ROI, then stubbing for a bathroom and kitchenette is thinking forward. Design your workshop so that it could be repurposed and it becomes an asset instead of a liability.

This, but also carefully consider zoning and codes in the process. We're looking into a new (to us) home this summer, and many of them will likely have a standalone single car or small 2 car garage. Depending on how some of those are zoned, a few are easy to add to/improve upon while others you can basically only "repair", not "improve".