A barndominium is a great investment for those looking for a new primary residence. However, buying a barndominium specifically as a real estate investment instead of a residence comes with additional risks. Here is a closer look at the pros and cons of investing in a barndominium.
Should You Invest in a Barndominium?
Are Barndominiums a good investment? Before investing in a barndominium, you should decide what you plan to do with the investment:
- Live in the barndominium
- Rent the barndominium
- Sell the barndominium
How you plan on using the barndominium determines its value as an investment. For example, if you want to buy and sell a property for profit, you need to ensure that you can sell it for more than you bought it. It may take years for the value of a barndominium to appreciate enough to make the investment worthwhile.
Yet, the sale price of the barndominium is less of a concern if you plan on living in it or renting it out. You do not need to worry as much about the future value of the property. The main concerns include the initial cost of the investment and how much you can save or earn.
For example, living in a barndominium is a worthwhile investment due to the low cost of construction, which results in a lower mortgage payment. Barndominium owners also tend to spend less on repairs, allowing you to save more compared to buying a traditional single-family home.
Renting the barndominium to a tenant could also be a good investment. The low mortgage and reduced risk of costly repairs allow you to collect more of a profit from rent.
A Barndominium May Outlast a Standard Home
Houses can last well over 100 years with proper care. However, portions of the wood framing and the concrete foundation may not last as long. Traditional homes are more likely to experience structural issues at some point, especially when built on a basement foundation.
Houses built on basement foundations are supported by the foundation. Barndominiums are typically built on slab foundations. When a barndominium is built on a different type of foundation, such as a crawl space or full basement, the steel posts are anchored to the sides of the foundation, keeping the foundation from supporting the full weight of the frame.
The steel frame of a barndominium should last hundreds of years if it is constructed correctly. The metal siding and roofing should also stand the test of time. The main concern is the presence of moisture, as moisture leads to rust.
Luckily, preventing rust is not a major issue. Most of the metal used for barndominiums features built-in rust-resistant properties. You can also direct rainwater away from the property to minimize exposure to moisture. To answer the burning question ‘Are Barndominiums a good investment?’ simply, with a barndominium, you should not need to worry about your investment falling apart during your lifetime.
You May Save Money on Maintenance and Upkeep
Maintenance and upkeep eat into your potential returns on real estate investments. Replacing siding and roofing and dealing with various cosmetic updates limits your profits.
Barndominiums often involve less maintenance compared to traditional homes and commercial properties. A typical barndominium has metal siding and roofing, which can last 40 to 70 years.
Vinyl and aluminum siding and asphalt roofs tend to last about 20 to 30 years. With a traditional home, you may need to replace the siding and repair the roof at least twice before needing to deal with these issues on a barndominium.
Barndominiums Tend to Cost Less Compared to Traditional Homes
Buying a barndominium is often a smaller investment compared to buying a traditional home, as barndominiums cost less to construct.
The average cost of barndominium construction is $30 to $40 per square foot. A fully furnished barndominium with quality materials and high-end furnishings may cost closer to $70 per square foot. However, you are likely to spend less compared to building or buying a standard home.
Wood stud frame homes cost about $100 to $200 per square foot. Depending on where you plan on building the barndominium and the furnishings that you choose, a standard home may cost at least twice the price of a barndominium.
Spending less on an investment property involves less risk. You may also qualify for a lower interest rate if you need to obtain a mortgage, which further reduces your costs and increases your potential profit.
The Popularity of Barndominiums Continues to Increase
Your ability to make a profit on a real estate investment depends on demand. If people are not interested in your property, you may struggle to sell it for your asking price. Finding a buyer should not be a problem with a barndominium.
Barndominiums are becoming more popular throughout North America. During the past couple of years, many people have decided to leave urban areas in favor of homes in areas that are less densely populated. Demand for homes in rural areas and suburbs has skyrocketed. The popularity of homes outside of urban areas should keep you from needing to undervalue your property.
How Much Do Barndominiums Appreciate?
Standard single-family homes have an average annual appreciation rate of about 5%. If your home is worth $100,000 this year, it may be worth $105,000 the following year. The value of a barndominium is unlikely to appreciate as quickly as a standard home, which makes it less attractive as a short-term investment.
The good news is that the value of barndominiums does not depreciate. Unlike a mobile home, barndominiums should gain value over time.
Are Barndominiums a Good Investment? Barndominiums may also increase in value at about the same rate as commercial properties. Commercial real estate has an average annual appreciation rate of 2% to 3%.
Challenges of Appraising a Barndominium
If you plan on selling your barndominium, you need to estimate its potential value. As barndominiums are not as common as standard homes, they are often a little more difficult to accurately appraise.
Appraisers typically use comparable listings to estimate the value of a property. Without comparable listings, your appraisal is based solely on its features and location.
To ensure that the resale value of your barndominium surpasses the cost of construction, consider building it in an area with a healthy real estate market. Look for regions where demand for new housing has increased and areas with strong economies.
Conclusion – Are Barndominiums a Good Investment?
A barndominium offers lots of space and often requires less maintenance and upkeep compared to traditional homes. Barndominiums also tend to cost less to construct. These benefits make barndominiums smart investments for primary residences.
You get a large home for less money, which is a good investment if you plan on living in the barndominium. However, you may want to explore other options before investing in a barndominium to grow your real estate portfolio.
Barndominiums are less likely to provide the same return that you could get flipping a traditional home. While your barndominium should not decrease in value, you can typically make more by buying and selling standard homes.
Yet, a barndominium could be an attractive investment for landlords. The lower cost of a barndominium requires less of an investment, allowing you to make more of a profit from rent.
The bottom line is that barndominiums are a good investment if you plan on keeping them for many years. For those that want to buy and flip properties, you may have better luck with traditional homes.