Building a barn - without a house

[soloudinhere]

We’ve come into a bit of a weird situation that may end with us taking possession of 24 acres of land that formerly belonged to my husband’s grandfather. His grandmother is infirm and the children want to get the land out of the estate. At this time, they want to sell it but recognize that the land is basically inaccessible because it doesn’t have a curb cut, so no approved homesite. About two years ago, the family cleared 4 acres behind the access easement where a driveway is supposed to go. The property has no utilities connected yet. They would be deeding us the land interfamily for $1.

This is all fine. I plan to use the land for my future facility. The issue? we have no desire to build a house on it since our house is 3 miles away. I would be driving back and forth as needed to take care of the horses and property, as well as connecting internet to the property to be able to supervise with wifi cameras.

Assuming we own the land free and clear, what is the best avenue to pursue regarding financing an 8-stall barn with outdoor arena and approximately 5 acres worth of fencing/cross fencing/etc? We would need land equity to be considered, but we do have some cash to put into the deal. I’d like the barn to be completed by September if at all possible.

I know how to do this if also building a house but that is a future consideration and we’re not intending to build there in the next 3 years. It would have to be farm financing or similar, but I just don’t know much about it. I am expecting we will need about $125,000 to clear 2 more acres, purchase and install a barn/driveway/utilities, and put in a basic outdoor arena.

[seabreeze]

Check with the Farm Credit in your area. If they can’t help you, they can probably point you in the right direction.

Congratulations on your new farm!

[Jersey_Fresh]

How much equity do you have in your current home? Can you take out a HELOC? If your household disposable income is decent you can be pretty aggressive with paying it off and we found the interest rates to be favorable.

We bought a house on a piece of land and wanted to put 20% down, which used up a good chunk of our cash reserves. We decided to open an HELOC against that to build the barn, fencing, arena, etc. I think when all was said and done we used about $60k from the HELOC and paid the rest cash.

We were able to pay the HELOC off in less than two years being very aggressive with it-I think we first drew from it in June 2016 and it will be paid off next month. We’ve paid maybe $2500 in interest since we opened it-we had a slightly higher rate by about 0.5% because we wanted access to 100% LTV vs 80%. We didn’t need that much but felt we wanted that option should we run in to major construction problems. Of course, I would have liked no interest at all, but its better than having to pay board on my horses while we saved to pay for everything in cash and we felt like long term, it was going to be less paid in interest than putting less than 20% down on the house.

Anyway, just an option I thought was worth mentioning if it works for you and the interest rates are in your favor.

[soloudinhere]

@Jersey Fresh

How much equity do you have in your current home? Can you take out a HELOC? If your household disposable income is decent you can be pretty aggressive with paying it off and we found the interest rates to be favorable.

We bought a house on a piece of land and wanted to put 20% down, which used up a good chunk of our cash reserves. We decided to open an HELOC against that to build the barn, fencing, arena, etc. I think when all was said and done we used about $60k from the HELOC and paid the rest cash.

We were able to pay the HELOC off in less than two years being very aggressive with it-I think we first drew from it in June 2016 and it will be paid off next month. We’ve paid maybe $2500 in interest since we opened it-we had a slightly higher rate by about 0.5% because we wanted access to 100% LTV vs 80%. We didn’t need that much but felt we wanted that option should we run in to major construction problems. Of course, I would have liked no interest at all, but its better than having to pay board on my horses while we saved to pay for everything in cash and we felt like long term, it was going to be less paid in interest than putting less than 20% down on the house.

Anyway, just an option I thought was worth mentioning if it works for you and the interest rates are in your favor.

We actually own our house outright and have a current equity line but there isn’t a lot available. Could you share where you got a 100% LTV equity line? The bank we used would only do 75%. We were considering doing a cash out refi instead but we’re hoping to be able to leverage land equity.

[Jersey_Fresh]

@soloudinhere Sure, I’d be happy to. We did ours through University of Kentucky Federal Credit Union. https://www.ukfcu.org/

You don’t need to be an employee of UKY to open an account, but I am not sure if they do out of state loans? Worth calling as our rates were super competitive and no fees. The only difference between 80/100 LTV (maybe it was 75% not 80%-I cant remember) was the small increase in interest rate but for us that was worth increasing our available funds.

If you need a contact there PM me and ill give you the number of the girl who did our loan. She is super nice and helpful. You may want to call around to local credit unions as I found their rates and fees were more competitive than say commercial banks like PNC.

[trubandloki]

Stretching the topic a little, I assume you have confirmed that zoning will let you build a barn on the land with out there being a residence?

[soloudinhere]

@trubandloki

Stretching the topic a little, I assume you have confirmed that zoning will let you build a barn on the land with out there being a residence?

I’ve never heard of zoning that requires a residence to be built on a property.

That being said it’s zoned multipurpose and this particular town has no regulations about horses in its zoning at all, for or against.

I did locate a local place that will do a 100% LTV equity line, I need to call them and see if they’re willing to take second position to our current equity line. If not, we can do a cash out refinance to access some cash. I was really hoping there were barn companies that offered financing - I know Morton does, for example. Our current house value isn’t high enough to access $125k in equity even if we borrowed 100%. The costs of starting my husband’s business are currently on our equity line and won’t be paid off for awhile.

[Jersey_Fresh]

There may be companies that offer financing but it may be cheaper to do it on your own vs pay a premium for a company like Morton. We went through a local Amish guy, paid cash.

Can you just borrow from your current line? Sorry if that’s a dumb question, I don’t have a lot of experience with multiple lines.

[soloudinhere]

@Jersey Fresh

There may be companies that offer financing but it may be cheaper to do it on your own vs pay a premium for a company like Morton. We went through a local Amish guy, paid cash.

Can you just borrow from your current line? Sorry if that’s a dumb question, I don’t have a lot of experience with multiple lines.

There’s not enough available to get started. We have a $175k line with $155k on it in startup costs from my husband’s business. We would have to get a 100% LTV to have any substantial amount available but it would still only be half of what we need.

[clanter]

They would be deeding us the land interfamily for $1.

if elderly grandmother is going to be needing federal/state assistance in the future there is a look back period of 60 months to review her financial transactions to see if she (or relatives) are hiding assets

I believe the correct way to handle this would have the land surveyed as a separate plot and then appraised for fair market value then have grandmother gift the land in non taxable increments She can gift to her grandson and you up to $28,000 per year until she maxes out at $5.49m

sure would be advisable to talk with a real estate attorney and a CPA who know elderly transactions

[clanter]

@soloudinhere

I’ve never heard of zoning that requires a residence to be built on a property.
.

well don’t move into a city as my city’s zoning laws will not let an accessory building (Barn) be built without a residential structure

[soloudinhere]

@clanter

if elderly grandmother is going to be needing federal/state assistance in the future there is a look back period of 60 months to review her financial transactions to see if she (or relatives) are hiding assets

I believe the correct way to handle this would have the land surveyed as a separate plot and then appraised for fair market value then have grandmother gift the land in non taxable increments She can gift to her grandson and you up to $28,000 per year until she maxes out at $5.49m

sure would be advisable to talk with a real estate attorney and a CPA who know elderly transactions

The land still sits in her now-deceased husband’s realty trust. She doesn’t have title to it, but the trust does. The executor of the trust is tired of paying taxes on it (grandfather died almost 15 years ago) and has been divesting a lot of the real estate in the trust over the past 5 years with this piece being one of the last remaining due to its total lack of marketability. It would not be an arm’s length sale, but effectively his deceased grandfather is selling it legally, not his currently-living grandmother.

[trubandloki]

@soloudinhere

I’ve never heard of zoning that requires a residence to be built on a property.

Worth checking. It is not unheard of in my part of the world (which I realize is not where you are). Just one of those road bumps to have out of the way.

[clanter]

@soloudinhere

The land still sits in her now-deceased husband’s realty trust. She doesn’t have title to it, but the trust does. The executor of the trust is tired of paying taxes on it (grandfather died almost 15 years ago) and has been divesting a lot of the real estate in the trust over the past 5 years with this piece being one of the last remaining due to its total lack of marketability. It would not be an arm’s length sale, but effectively his deceased grandfather is selling it legally, not his currently-living grandmother.

just make sure as trusts created after 1993 are viewed differently … that includes both irrevocable and revocable trusts

[Jersey_Fresh]

@soloudinhere what about Farm Bureau? Would they offer construction loans for building ag facilities (though I’m not sure if horses classify as ag where you are)

[beau159]

@seabreeze

Check with the Farm Credit in your area. If they can’t help you, they can probably point you in the right direction.

Ditto. They often can give you great rates because a barn is considered “farm”.

We have our land loan through Farm Credit Services; they’ve been fantastic and no other bank could match what they gave us. When the time comes we will be financing the barn through them too.

We’ll be doing a house first and they could do our home loan too, but my guy was honest and upfront with me and said houses usually aren’t a very good deal through them, so we’ll stick with our normal bank for that.

[OneTwoMany]

@trubandloki

Stretching the topic a little, I assume you have confirmed that zoning will let you build a barn on the land with out there being a residence?

This!!^^ You should definitely check with your local Township and/or building inspector before you do anything. Call them. Ask your questions. Get a copy of the zoning laws and if possible get the township’s response in writing.

In our township, one is not allowed to build an “accessory building” without a residential building on the property; barns are considered to be “accessory buildings”. We were miss-informed by various “professionals” many times along the way.

In the end, we had to construct a house before we were permitted to put up a barn. Also, there were “set back” rules, which is to say, the house had to be a certain number of feet in front of the barn.

When you contact your township and inquire about the zoning laws be sure you are speaking to someone who can provide you with a copy of the code and is willing to issue you a statement that what you are planning is permissible. You may have to hire a professional to draw up some plans before the township will sign off.

Finally, you may want to inquire about how many horses are allowed on the property. Our township originally required 5 acres per horse! Yikes!

The process of securing the township’s approval to build our farm, was a real eye-opener, especially considering there are many farms in our area that have been passed down over the years. You would think there wouldn’t be so many obstacles to preserving or reclaiming farmland.

[soloudinhere]

@OneTwoMany

This!!^^ You should definitely check with your local Township and/or building inspector before you do anything. Call them. Ask your questions. Get a copy of the zoning laws and if possible get the township’s response in writing.

In our township, one is not allowed to build an “accessory building” without a residential building on the property; barns are considered to be “accessory buildings”. We were miss-informed by various “professionals” many times along the way.

In the end, we had to construct a house before we were permitted to put up a barn. Also, there were “set back” rules, which is to say, the house had to be a certain number of feet in front of the barn.

When you contact your township and inquire about the zoning laws be sure you are speaking to someone who can provide you with a copy of the code and is willing to issue you a statement that what you are planning is permissible. You may have to hire a professional to draw up some plans before the township will sign off.

Finally, you may want to inquire about how many horses are allowed on the property. Our township originally required 5 acres per horse! Yikes!

The process of securing the township’s approval to build our farm, was a real eye-opener, especially considering there are many farms in our area that have been passed down over the years. You would think there wouldn’t be so many obstacles to preserving or reclaiming farmland.

There is no zoning in favor of or preventing horses in the town in question. As far as the accessory structure, nobody can find anything that says you have to have a residence, just if you do there has to be so much clearance etc. This is a rural area with relatively few covenants and restrictions on property use.

However sometimes the stars align and a facility has come up for sale that is basically exactly what I would want, so we are starting that process instead.

[clanter]

There is no zoning in favor of or preventing horses in the town in question

just a word about extraterritorial jurisdiction … here a city’s jurisdiction and zoning change legally extend up to five miles beyond its boundaries … you may wish to make sure if there is a close by town/city … if there is one ask about extraterritorial jurisdiction

We had some land outside of Denton Tx and had to pay for the extension of some city services (water line impact fee) even though the land lay outside of its boundary

[soloudinhere]

@clanter

just a word about extraterritorial jurisdiction … here a city’s jurisdiction and zoning change legally extend up to five miles beyond its boundaries … you may wish to make sure if there is a close by town/city … if there is one ask about extraterritorial jurisdiction

We had some land outside of Denton Tx and had to pay for the extension of some city services (water line impact fee) even though the land lay outside of its boundary

He land in question in 3/4 of a mile from the town’s downtown (such as it is). The property was split off the back of a residential property when that property was sold 3 years ago, which is why no home has been built yet. There is utility access though of course we will have to pay to install them.

there has been some development interest in the property, but it is undevelopable currently because the access to the main road was legal width when they drew the lines in 1972, but is now too small for a legal roadway though it is sufficient for one driveway. Thus the land can’t be subdivided and can only have one homesite.