General thoughts on barndominiums? Can they be a successful investment?

[Account Closed]

Hello,

I hope everyone is having a great day!

As the title states, I am curious to hear more experienced investor’s thoughts and opinions on barndos?

They are popping up everywhere in rural Texas and I’d like to know if it would be a viable strategy 

- Is it possible to even get financing for one? 

- Do the appreciate? Do they at least hold their value?

- Are rental rates comparable to a regular SFH?

Thank you for your time and replies 

[Tanner Sherman]

Most people that are building these barndominiums are building them as a primary residence, so I don't know that there is enough data as to whether or not they would be successful as investments. I would suggest talking to community banks about how they will estimate the value. If your lender will be using the comparable approach, it might be difficult to get a loan as there probably isn't a whole of comparable sales since they are really new to the market. If they will be using the income approach, then all you are doing is putting together a business plan for the lender showing them how your project will more than support the debt service and be a viable investment for the bank. 

I would expect rental rates to be comparable, I think this a really good idea and one I have definitely considered myself! Get really good at estimating build cost, rental rates and be ready to pivot constantly as you enter into the development world!