Business Loan for New Home Shop

[Fal Grunt]

Great follow up, thanks for taking the time to do that.

My wife and I are in a similar situation. 1000 sq ft shop behind the house, and in the 10 years we have been here, the city has gotten worse and worse. In 2020 they banned machine shops in city limits, so we are working on a exit strategy, but working with the banks has been.... well.... difficult.

People go on and on about how they think you can do whatever you want, until you talk to a bank. The federal government regulates what you can build and how?! Amazing... the land of the free indeed.

 

[Garwood]

Great follow up, thanks for taking the time to do that.

My wife and I are in a similar situation. 1000 sq ft shop behind the house, and in the 10 years we have been here, the city has gotten worse and worse. In 2020 they banned machine shops in city limits, so we are working on a exit strategy, but working with the banks has been.... well.... difficult.

People go on and on about how they think you can do whatever you want, until you talk to a bank. The federal government regulates what you can build and how?! Amazing... the land of the free indeed.

You just need to reclassify the work you do.

Farming is a tough business, but my duck, tortoise and blackberry farm is thriving with the 8k sq ft climate controlled farm equipment maintenance shed.

 

[Fal Grunt]

How does that work when the bank officer comes to inspect your farm and you have to supply the number of duck, tortoise and blackberry produced and sold in your yearly financial statements to the bank?

 

[gustafson]

As far as HELOC is concerned, you can do pretty much what you please with the money if you have the equity to borrow against.
If the thing you do with the money increases the value of your property you can refinance a regular mortgage to cover the completed project.

 

[Garwood]

How does that work when the bank officer comes to inspect your farm and you have to supply the number of duck, tortoise and blackberry produced and sold in your yearly financial statements to the bank?

I had no problem getting a mortgage loan with my tax returns and current P&L.

Why does your bank need to see how your business works?

 

[Chris Lesiak]

Maybe you could do what this guy did (well within the city limits). The lower-left structure is a (now) brick garage. The upper left is a metal building. In the center is a small shack that makes the whole thing legal.

 

[Fal Grunt]

I had no problem getting a mortgage loan with my tax returns and current P&L.

Why does your bank need to see how your business works?

An agriculture loan is federally subsidized and the bank wants to know specifically what you are growing, who the market is, how you'll be selling, etc. If your an established customer getting a loan for a grain silo, they could care less. A new customer, starting a new "farm", is a different story.

You didn't get a "farm" loan selling "duck, tortoise and blackberry" without showing the bank that's what you were doing.

Likewise you didn't get a business loan selling "duck, tortoise and blackberry" without providing similar information to the bank.

So I'm confused when you said "change what you do, and "farming" but then said mortgage.

Not trying to be a shit head, maybe you were just making a satirical joke, but you can't do what you said.

 

[EmGo]

People go on and on about how they think you can do whatever you want, until you actually try to do it.

Edited that for you a bit ... I think I have mentioned this before, to somewhat less than enthusiastic applause

 

[Garwood]

An agriculture loan is federally subsidized and the bank wants to know specifically what you are growing, who the market is, how you'll be selling, etc. If your an established customer getting a loan for a grain silo, they could care less. A new customer, starting a new "farm", is a different story.

You didn't get a "farm" loan selling "duck, tortoise and blackberry" without showing the bank that's what you were doing.

Likewise you didn't get a business loan selling "duck, tortoise and blackberry" without providing similar information to the bank.

So I'm confused when you said "change what you do, and "farming" but then said mortgage.

Not trying to be a shit head, maybe you were just making a satirical joke, but you can't do what you said.

Sorry, I wasn't following the "Business loan" premise of this thread, I was just responding to how you said you are in a tough spot trying to move away from the city.

When I was in that situation, I didn't get a business loan, I got a mortgage. I strategically bought a place in the country. I don't have a huge sign on the road that say's "GARWOOD'S MACHINE SHOP" and I wouldn't want one anyway. I do have some large yard art indicative of a machine shop. It's easy to tell people "turn in the driveway that looks like it goes to a machine shop". I have some farm-like critters, some grain silo's and a huge shop that very intentionally looks exactly like a barn from the road, but like a factory from the backside. I have an agricultural tax deferral for my land which I legally meet all the requirements for by selling $300/yr of organic blackberry plum fruit leather and duck eggs and consuming another $300/yr of fruit and eggs grown here myself. My AF-20 zoning requires that no single one of my buildings can exceed 10,000 sq ft and that at least 40% of the building is devoted to agricultural use to include equipment storage and maintenance. I do believe I meet all those requirements with the work I do. It also doesn't hurt that I have the largest capacity machine shop in the county and the area ag, timber and rock industries would like it if I stay.

So maybe I misunderstood your complaint? Do you want a house/shop in the country type arrangement or are you saying you want a commercial building in the city?

 

[standardparts]

Great follow up, thanks for taking the time to do that.

My wife and I are in a similar situation. 1000 sq ft shop behind the house, and in the 10 years we have been here, the city has gotten worse and worse. In 2020 they banned machine shops in city limits, so we are working on a exit strategy, but working with the banks has been.... well.... difficult.

People go on and on about how they think you can do whatever you want, until you talk to a bank. The federal government regulates what you can build and how?! Amazing... the land of the free indeed.

One of the problems is geographical differences not only from state to state, but city to city and then on down to county/township/village makes comparisons difficult.
No doubt things can vary quite a bit between Ohio and many other states.
Often times people will showcase their property and structures knowing that they are grandfathered in regards to codes and zoning and are no longer permitted. Covenants/restrictions, easements can become a real issue, as well as water and sewage code requirements.
Your best bet if you intend to stay close to where you are at now and come up with a list of what you are looking for and try to find a real estate agent who is savvy in rural land.
Around here, in SE Wisconsin things are changing rapidly in regards to zoning and I'm sure that is the same elsewhere.
And....if a FFL is a requirement for business purposes that can create other issues that need to be taken into consideration.

 

[Fish On]

When I was in that situation, I didn't get a business loan, I got a mortgage.

Key word there - mortgage. Not construction loan. Mortgage implies preexisting building.

Mortgage is no big deal - all the bank really cares is if the property appraises for financed amount.

Construction loan for commercial purposes is MUCH harder to come by.

 

[Toolmaker51]

I left CA, wife wanted a older home, coupled with a shop for myself. Original plan was farm/ rural land. Our age showed that impractical, based on should lives change. I've heard that happens.
Those tied together would be an access problem without really unusual circumstances. So instead, found a house in an area she liked, that I found a dang good building not 3 miles away.
Shop wise; one must consider delivery of construction material, construction costs for a substantial floor (machine foundations) an efficient structure, 3 phase power or capable generator, cranes, ramps, at least one machine sized door......and that's just for starters.
I'd recommend a real estate property finder app, and the same for commercial property.
I don't think you'll score like I did, but it's free to surf and check around.
I bought 6500 square feet (~102k cubic), load dock high, forklift ramp, zoned M1, on a street into downtown, 3 phase available, 3 big doors, on 1/3 acre for laydown yard.. It's 100 years old, I reroofed the flat structure with trusses and snow pitch for our weather zone.
The total of purchase and roof against average per foot price in SoCal of a lease; in just under 7 years.
Describing that in person, I stick my hands out as if weighing produce "...let's see; rent or buy?"

 

[kpotter]

I was in my house about 13 years ago. My shop was too small and I needed more electricity. I looked into building because I thought it was cheaper. It was way more expensive. I tried getting a loan to buy a building. That is nearly impossible as well. I am going to tell you what I did but I wouldn't recommend it unless you don't have other options. Hard money lenders
I borrowed 60 grand from one and 60 grand from another using the same collateral. I bought a building that needed lots of work. I paid the money guys back over 2 years. 15 percent interest. I used a PayPal loan to buy the building next to the first building and the owner carried the mortgage on the third. Getting your first place is the hardest. Hard money guys are easy to work with they are just expensive.

 

[Freedommachine]

I had about 90k on credit cards at one point. It took carful planning and some extra savings but I was able to pay the cc bills in full each month.

You have balls of steel my friend, just reading that raised my heart rate. How did you ever find time to build a house and run a business?

Had you ever built a house before? Was any part of the building process something that you knew nothing about going into it?

In 2020 they banned machine shops in city limits

I'm in a township, we have a few restrictions like no racetracks, zoo's or junk piles.

You can have a home business as long as it doesn't interfere with neighbors. You can have a max of 3 employees who do not live on the property and you can have a sign as long as it does not exceed 3'x4'... Or maybe it's 2x3.

 

[goldenfab]

You have balls of steel my friend, just reading that raised my heart rate. How did you ever find time to build a house and run a business?

Had you ever built a house before? Was any part of the building process something that you knew nothing about going into it?

I did a few jobs here and there but I pretty much took a hiatus from my business and worked on building full time. My wife has a good enough job that has been able to cover everything. If it wasn't for that it would have been impossible.

 

[john.k]

First ,never call it a shop......its a 7 car garage + RV parking +boat .........entirely domestic ...........and oddly enough the town planning laws in the land of the free seem to about the same as here ......must have a house first ,or an approval for both house and shed.........I got tangled in this over 40 years ago,and ended up having to rent zoned industrial to satisfy the council.

 

[goldenfab]

Home loans have the best rates because the unholy union of the government/Fed being involved in subsidizing the financial markets and as such the loan has to meet the certain requirements. Assuming your credit and income will qualify you, you could probably still get financing but it won't be a traditional mortgage and you won't like the rates and terms.

Where I'm at I had to get my house permit first and shop second but there were no rules on what had to get finished first. I poured my house foundation first and then finished my shop before building the rest of my house. Only reason I did this is so I could live in my shop so I could put more hours in building my house. May or may not work in your case. Do you have a house you can take out a Home Equity Line of Credit on to build the shop? Will zoning allow standalone utility buildings? My zoning doesn't.

First ,never call it a shop......its a 7 car garage + RV parking +boat .........entirely domestic ...........and oddly enough the town planning laws in the land of the free seem to about the same as here ......must have a house first ,or an approval for both house and shed.........I got tangled in this over 40 years ago,and ended up having to rent zoned industrial to satisfy the council.

For sure, keeping it residential will probably help out. Are you building a house on the same property? I don't see why you could not get a mortgage for a house with an RV garage.

 

[john.k]

The guy owns next to me is rich,possibly a bilionaire ,and he was telling me of the strokes he pulls to get rural taxes on his development land .......he was buying $10,000 worth of pumpkins and reselling them ,then he discovered the best kept secret in the business .........no tax if you have so many native bee hives .........all the really big "land bankers" have this lurk,snuck thru the parliament as a green initiative...(Native bees are a tiny stingless bee,critically endangered.)

 

[jaguar36]

(Native bees are a tiny stingless bee,critically endangered.)

Wait, there is are stingless insects down under?

 

[john.k]

Thats why they are endangered.