I want a detached metal shop building. Concrete pad, insulated, 2 bay doors, hydraulic lift. Roughly 40x40. Since steel is starting to come down I'm giving more thought into planning for it.

What I don't have a lot of experience in is finance. I've done 2 mortgages, and I took out a loan from my retirement to buy the land we live on now. That actually worked out well, but since my Roth 401k has a decent balance now, I'm not sure I want to pull out a chunk and miss out on some decent returns.

What are some other options? I could pay for it 100%, but that would wipe out my family's savings, so that's a no-go. Personal loan? Home equity? Something else I'm not familiar with? Should I just start selling drugs?

I'm not gonna say anything mid blowing here but...

If you use savings, pay back to yourself what a loan woul cost you each month, and make yourself money.

If the savings is there for an emergency, the loans will be there for an emergency also.

But that way you're only paying finance charges in an emergency. And in short order I'm sure your savings will be back to a respectable amount with you paying yourself each month.

Personally, I'd make an appointment to talk to the loan officer at my local credit union, or local bank (not one of those huuuuuuge national sized banks).

I would not start out by asking for a loan, in fact I'd state that right up front to him/her, and that I'm wanting his/her advice on what would be their thoughts on how/when to do so.

Something along the lines of "I'm not necessarily asking for a loan, I just want your advice on a xxxxxxx that I'd thinking of doing, but I'm not sure what would be best suited, financially speaking, for my benefit, and I thought you might be able to give me some advice on how to do this xxxxxx, assuming I decide to go ahead with it, or perhaps you might tell me some reasons why not to do it".

Then I would talk to one or two more for their advice.

I have found that to be an effective tactic over my lifetime.

Good luck to you.

quote:

Originally posted by OKCGene:
Personally, I'd make an appointment to talk to the loan officer at my local credit union, or local bank (not one of those huuuuuuge national sized banks).

I would not start out by asking for a loan, in fact I'd state that right up front to him/her, and that I'm wanting his/her advice on what would be their thoughts on how/when to do so.

Something along the lines of "I'm not necessarily asking for a loan, I just want your advice on a xxxxxxx that I'd thinking of doing, but I'm not sure what would be best suited, financially speaking, for my benefit, and I thought you might be able to give me some advice on how to do this xxxxxx, assuming I decide to go ahead with it, or perhaps you might tell me some reasons why not to do it".

Then I would talk to one or two more for their advice.

I have found that to be an effective tactic over my lifetime.

Good luck to you.

Isn’t that like asking a drug dealer if you should do drugs?

Would refinancing/taking equity out of the property be an option? The interest would be lower, and you'd still have access to your savings for emergencies.

quote:

Originally posted by 1s1k:

quote:

Originally posted by OKCGene:
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Isn’t that like asking a drug dealer if you should do drugs?

No not really. For one thing, it lets the banker realize that you are serious and contemplative, etc, and thus be a much safer risk, and thus there's a really good chance you might get a lower interest rate.

This may not work in the big city as well, but it works especially well when you can establish a track record with a particular banker, and thats why I said to go to a local credit union or local bank.

Bankers don't like risk and losing money, I think you see where I'm going with this.

A good and seasoned banker can help keep you out of trouble, so to speak. Money and building are not your forte thus you may be swimming with the sharks.

There are a few other reasons, and it's late so I'm going to bed.
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Is this going to be a revenue generating shop or a hobby shop? That will be a huge differentiator for the banks.

I don't believe in financing my hobbies but if you insist.
Open a home equity line of credit but don't use it. Savings pays zero point nothing right now and is taxed too and is loosing value due to the extreme inflation (real is way over the fed's claims.
Keep it (LOC) available for emergencies. Pay for the place with as much cash as possible. See if you can generate some income from something in the shop and use that and savings to build up the savings again.

I'd go with OttoSig's suggestion. If you feel you have to finance some of it I'd do a home equity. We're looking forward to seeing the plans and images as it goes up!

I'm considering having a basic metal storage building put up myself.

quote:

Originally posted by OttoSig:
I'm not gonna say anything mid blowing here but...

If you use savings, pay back to yourself what a loan woul cost you each month, and make yourself money.

If the savings is there for an emergency, the loans will be there for an emergency also.

But that way you're only paying finance charges in an emergency. And in short order I'm sure your savings will be back to a respectable amount with you paying yourself each month.

quote:

Originally posted by 1s1k:
Isn’t that like asking a drug dealer if you should do drugs?

Hahaha!

We’ve only had the mortgage for a couple of years, so it doesn’t seem like there’s a lot of equity. Or am I misunderstanding how that works? (I hate this stuff, if you can’t already tell)

This will not be for revenue generation purposes. I do have my LLC registered at my home address, but it is a training business where I go to the customer to train others. I wonder if I can work that…fabricating training aids?

The main hold up about ottosig’s idea is that, if there is an emergency, I’d need to apply for AND get approved for a loan. That takes time and is not guaranteed, depending on the scope of the emergency.

Actually, Otto's advice makes sense.

If you use your savings, you own the building outright and are "repaying, with interest" your emergency fund.

As soon as the building receives the Certificate of Occupancy, apply for a HELOC against it, and that is a secondary source of emergency funds as well (Primary as you are repaying your Emergency Fund). Meaning, apply for the HELOC on the finsihed building, but only use it if you have to in the future.

Your only "exposure", is during the building process, but you pay that out in scheduled/milestone draws as construction progresses and then you retain a small percent until inspection, punch list and (sometimes) 30 days after CO, to discover any defects.

That keeps (some) funds available, should an emergency occur during the process.

If you can fund yourself and pay yourself the "interest", you come out way ahead on your "investing", but as with great returns, come greater risk.

On "paper" this approach is pretty sound. Only your actual circumstance is relevent, though.

(and researching cost, liability, insurance and financial benefit to renting storage space for vehicles in your building, to provide income, should you need another source. It might be worthwhile, or it might be a greater PITA than ROI, but learning the facts could be worthwhile)

I thought you had no mortgage when I suggested a home equity for emergency cash backup. Sounds like that's not an option at this point.
If you are highly leveraged already, (my reading of your description) and this is just a hobby shop, and in our potentially volatile market, I'd put it on hold.
I guess I have been through enough ups and down's and sudden changes in circumstances to have a different viewpoint about borrowing. The real estate and job markets are both hot right now, in a year or two, who knows.