As barndominiums continue to grow in popularity as a home option, many want to know how they fare as an investment. The good news is that barndos gain value over time when properly constructed and maintained.
Read on to learn more about the ins and outs of investing in barndominiums.
Are Barndominiums A Good Investment?
The first step in determining the investment value of a barndominium is to decide what you plan to do with the investment:
- Quickly resell
- Rent the dwelling
- Live in it as your primary residence
Barndominiums take years to appreciate enough to make more money than you spent so they are not a good option for a quick profit.
The appreciation rate of traditional single-family homes is roughly 4-5% annually. By comparison, barndominiums are shown to appreciate at the same rate as commercial buildings, which is 2-3% annually.
As a rental investment, barndos offer a good investment value due to their low mortgage payments and durability, which means less costly repairs to your rental property than in traditional homes.
As a home investment, barndominiums are a great investment due to the low cost of construction, which translates into an affordable monthly mortgage.
Also, their extreme durability and energy efficiency mean owners tend to spend less on repairs and utility bills. This translates into greater savings than buying a traditional home.
Average Cost Of Building A Barndominium
The average cost of building a barndominium can vary, depending on the size of the building and the quality of finish-out you do on the inside of the structure.
On average, according to Homeguide, barndos cost on average $65-$160 per square foot, meaning a 2,000 sq. ft. barndo will cost $130,000-$320,000.
Barndominium kit prices for the exterior materials cost $20-$35 per square foot.
Barndominium Financing (Mortgages)
Because barndominiums are a relatively new housing option, finding financing can be challenging.
The most important step you can take is to be prepared by having a great credit rating, detailed blueprints, kit costs, bids from contractors, and details on the land you are purchasing for your build.
Local banks and farm credit lenders offer the best bet for finding financing to build your barndominium. Small local bankers are a great source for a financing option as these types of banks offer a friendlier face to potential borrowers.
A well-prepared presentation will provide the banker with confidence that your loan needs are well thought out.
Barndo funding is usually done in two parts:
These loans are typically financed for a one-year period and are to finance the actual construction of your barndo.
This covers remaining costs and are set up as either a fixed interest rate or as an adjustable interest rate loan.
You determine the loan term, which is usually a 15-, 20- or 30-year mortgage.
Insurance & Barndominium Values
As barndominiums grow in popularity, there are now more insurance companies working with barndo owners to provide the right insurance policy to replace your barndo home in the event of a natural disaster.
Barndominium insurance is much the same as a traditional homeowner’s insurance policy, with the main difference being that a barndo insurance also covers the portion of the structure that is not designated as living space.
Homeowner’s insurance covers damage or destruction of your home in the event of a flood, fire, tornado, hurricane, or other natural disaster.
Steel-framed barndominiums have a much better chance of surviving an F2 tornado or a category 4 hurricane than a traditional wood-framed house.
However, not many structures can sustain a direct hit from a tornado or a hurricane without incurring some damage, so it is important to obtain insurance to cover these types of potential damages.
In homeowner’s insurance, you have two basic options:
- Actual cash value policies provide you with the amount of money your barndo was worth when it was destroyed.
- Replacement value policies cover the entire cost of rebuilding your barndo.
Your choice will determine the amount of your premiums.
Many insurance companies do not have pre-packaged policies for barndos, so you will most likely work with your insurance company to create a specialty blended policy to cover your structure.
Certain locations, such as those properties located in areas prone to flooding and hurricanes, require additional insurance policies.
In coastal and low-lying areas, your mortgage company may require flood and/ or windstorm insurance policies in addition to a general homeowner’s policy.
Liability insurance policies are an additional insurance policy you should consider, particularly if you have livestock on your property.
This type of policy will protect you in the event someone is injured on your property.
How To Value A Barndominium
Determining the market value of your barndominium depends on several factors such as location, size, design, construction quality, and building guarantees.
The area where a property is located is always one of the primary considerations in determining its value.
Barndominiums located in popular areas with nearby attractions and amenities, as well as in “safe” areas with little criminal activity, will command a higher price than those in rural areas or locations with high crime.
The valuation of a dwelling is impacted by its size in determining cost per square foot. In general, the larger the square footage, the higher the value.
With that said, in the initial design of your barndo, the cost per square foot to build is less than traditional homes due to the materials utilized in barndo construction, meaning you can get a lot of square footage for less than in a traditional home, both in construction and resell.
Distinctive, custom design in interior finishes will increase the resell value of your barndo. Items to consider include:
- Custom cabinetry
- Radiant floor heating
- Marble countertops
- Exposed beams
- High-quality, durable flooring
- Open floor plan
- High ceilings
- Large master suite
- Flexible spaces
- Laundry room with folding area, a place to hang clothes, and a utility sink
- Outdoor living space
A well-designed barndo will fetch a higher price than one that is poorly designed. One thing that makes barndominiums an attractive home option is their extreme flexibility in offering completely customized layouts.
However, when you design for you and your family’s particular needs, it can be difficult to find a buyer with those exact same needs and it can also make it more difficult to find comparable homes to determine the value of your barndo.
One of the main factors in determining a home’s value is comparable (comps) properties to determine the price at which they were sold.
The accuracy of your appraised value will be improved by looking at comparable sales that are most like your barndominium. It may be necessary to expand your search by going back further than six months and searching for other barndominium sales in other cities or states.
When utilizing comps in other areas, be sure to state the location in your report and information on performance in that market compared to performance in your particular market.
Barndominium kits typically include high-quality construction materials, which include durable steel beams and stainless-steel fasteners. With materials, the old adage – you get what you pay for – is true.
It’s essential to work with reputable builders to ensure the materials used in your barndo construction are durable, high-quality and meet building codes and industry standards.
When it comes to siding and roofing choices for your barndominium, there are several options. You can utilize any of the options available for a traditional wood-frame home.
If you choose to go with a metal roof and siding, make sure the material is galvanized to prevent rust.
It’s also important not to skimp on the lumber used for interior finishing. The use of high-grade lumber in your building is imperative.
You may be able to skimp on some items for your barndo, but lumber should not be one of those items.
Equally important for protecting the inside of your barndominium is the use of quality insulation.
Different barndominium kits and builders offer various warranties. When building, look for warranties on the steel, fasteners, exterior panels, and exterior paint on those panels.
Also, look for builders who offer warranties that guarantee construction. These types of warranties and guarantees will contribute to higher resell values.
7 Factors That Affect Barndominium Resale Value
Resale value is the amount of money you can make when you decide to sell your barndominium.
There are several factors to consider in determining the resale value. The factors that impact the resale value of your barndominium are very much the same as the factors you utilize in determining its value.
Read on to learn more.
In general, when choosing comparable property sales, you should choose homes in similar locations that are near your property. You should also choose homes similar in size, bedrooms, bathrooms, and features.
Comparables are also generally selected based on recent sales. However, as mentioned above, because there are still not many barndominiums out there, you may have to expand the parameters in your search for comparable sales.
Key factors in valuation regarding location are area employment rates, the walking score of the area, nearby amenities, and proximity to parks and schools.
3. Square Footage
In determining the square footage of your barndominium, calculate the livable space, which is the space that is heated and cooled within your barndo.
One of the attractive differences in barndo homes is the abundance of space. Due to their higher ceilings and ease in the incorporation of open floor plans, they often feel larger than traditional homes.
4. Age of the Barndo
The older the home, the less the resell value. Newer homes generally need less repairs than older homes.
The beauty of barndos is that they are designed to be extremely durable and low maintenance, which also gives them a leg up in determining the resell value.
5. Home Features
Energy-efficient appliances and mechanical systems create higher resell values.
Custom design features will also add to your value when selling your barndo.
6. Construction Quality & Guarantees
When building your barndo, ensure you utilize high-quality construction materials on both the exterior and interior of your home.
Make sure your barndo kit and builder offer guarantees and warranties on both the materials and their work as these will lead to increased values when you sell your property.
7. Well Maintained
Ensuring your barndo is well maintained will also help increase its resell value.
It is important to perform routine maintenance, which includes checking for rust, inspecting the roof, keeping the structure free of dirt, mud, and leaves, and performing any necessary repairs.
How Long Do Barndominiums Last?
Depending on the type of barndominium construction you choose, these structures can last more than 100 years. The other factors impacting the longevity of barndominiums include the quality of construction and materials, upkeep, and its environment.
Steel frames have an 83-year average life expectancy; as for wood-framed structures, it’s 69 years. High-quality steel is made to resist rust and is not affected by insect damage or fires.
To sum up, steel framing has more durability and resistance to aging factors compared to wooden frames.
Barndominiums are a great investment choice as they gain value at an average rate of 2-3% per year. Due to their extreme durability, energy efficient nature, and low maintenance design, with the use of quality construction materials, barndominium owners who make sure to maintain their home can expect to profit from the investment over time.
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