Author Topic: Convert a Barn to a Rental?  (Read 1649 times)


  • 5 O'Clock Shadow
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Convert a Barn to a Rental?
« on: August 22, 2014, 12:18:02 PM »
Hi all, first time poster here!

Wife and I purchased a house on acreage with a 1000sf/ft barn on the back part of our property.  After fixing up the main residence, I started thinking about the barn, and thought, "Hey, let's convert it and rent it out!"

After talking with builders, the county, and engineers, it's definitely doable.  But the one big question is to Permit or No Permit?  Permit fees will probably be around $14K, building costs $25K (guestimate on the high side due to some unknowns). 

With no permit, I can't get an address for the barn.  A seperate electrical meter might be a pain as well.

Haven't thoroughly researched rental prices for my area, but guessing $1000/mo, more if I allow the tennant to have their horse.

So two questions, 1.  Are the permit fees worth it in the long run, resale, etc?
2. Is this a wise use of money?  I have cash for the construction costs, permit costs will come from my taxable acct.


  • Pencil Stache
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Re: Convert a Barn to a Rental?
« Reply #1 on: August 22, 2014, 04:02:11 PM »
first off, permit the damned thing. the headache now will be 1/10th of the headache when you try to sell. Or have to tear it down. If this doesn't make sense to do legally, with permits, paying taxes on the income, etc, it ISN'T worth doing at all.

Second how sure are you of the conversion costs?  seems a little light to me, but I don't know how close it already is. Do you need to put in a sewer, water service? any of that?  In my city, the sewer line alone, with permits, would cost nearly 15K. Electrical could easily be 8-10K by itself I'd think.

Also, unless you're putting in another sewer service, I don't' see how the permit would be 14K. Might want to firm that up.

By conventional wisdom, you could spend up to 100K on the conversion and still have it cashflow if you follow the 1% rule. 
Looks like it's worth doing to me.

Third, can you borrow the money versus selling investments? sounds like this would cashflow well enough to cover it.


  • 5 O'Clock Shadow
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  • Posts: 8
Re: Convert a Barn to a Rental?
« Reply #2 on: August 22, 2014, 04:52:43 PM »
Thanks, I hear ya about the permitting:)  I work in construction so just talking to builders and the likes I get a 50/50 response on permitting it.  Its such a small project I get weird looks when I ask!

The actual structure of the barn is of newer construction (built in '90 & permitted), so the conversion is really just interior walls,windows, doors, insulation, drywall, plumbing, electrical, kitchen/bath appliances, and all the finish work.   
It would be on septic, approx. $5k.
Electrical, new meter $500, trenching/conduit $500.  Already have meet with Elec. Comp.
On a well so trenching, PVC, new tank $3k
Drafting $1k
Engineering Free! (I work for one)

I would do a good majority of the work and borrow a tractor for the trenching.  So I'm Pretty confident in the $40sq/ft, but its construction, there will be hicups.  I also salvage what I can when I'm on jobs (I don't think I've paid for nail strips in years!).

I have enough cash for the whole project, I'd just be dipping into emergency fund money.  Really don't want to get a loan or borrow from relatives.  When I'm waiting for the permit, I'll save a little on the side for construction.

What is the 1% rule, thanks


  • Handlebar Stache
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Re: Convert a Barn to a Rental?
« Reply #3 on: August 22, 2014, 04:56:51 PM »
1% rule says that you generally want to be able to get 1% of the investment/value in rent per month. EG, 100k hours, 1k/month for rent.


  • 5 O'Clock Shadow
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Re: Convert a Barn to a Rental?
« Reply #4 on: August 26, 2014, 05:13:36 PM »
Please permit it. ncornilsen is so right that any unpermitted work is a potential nightmare later on... like haveing the county come and demand that you spend tens of thousands of dollars to undo your own work. And be aware that you may be creating a 0 value or unsaleable structure. Talk to an appraiser and a mortgage person as well. Even if you don't need a loan you have to consider the person that you may some day want to sell it to. Most banks are completely unwilling to lend on unique structures (go try to finance a dome house a heavily modified modular home or anything else wonky) And an appraiser can only value on comparable homes... if there are no other comparable homes with converted barns or similar mother-in-law like structures you adding a 1000 sqft rental to your land may only improve the value by a few thousand dollars (or even decrease the value).