How much does a shop build add to property value?

[Jonathan Jung]

For those of you who've built a shop, how much value did it add to the property? For instance, if a shop costs $150k, can the property value increase the same? Less? More? I know there's many variables. Thought maybe some of you have been through this, having built a shop then had property value reassessed.

My wife and I are looking to buy a property with a home, and the question is if we should look for one with a shop, or without and build a shop.

[Mark Wedel]

I have no idea (not having done that), but I would think a lot would depend on the shop and whether it could be repurposed as something else. If the only possible use is ever a shop, it is going to have less value than if it can be used as a garage, or extra living space (water & sewage to put in a bathroom for example, so maybe could be an ADU down the road which could get rented out or act as in in-law quarters).

I suspect all else being equal, a house with a shop is going to be cheaper than a house without a shop and then building that shop. But this also presumes there is a reasonable inventory of houses with shops (and your not giving something else up, like location, by buying one). And if you build your own shop, you are getting exactly what you want (no compromises on size, layout, etc) - a house with a shop, depending what it was used for, may still need a bit of work to bring it up to the standards you want.

Not sure about other states, but proper tax assessment rules can vary a lot state to state. In California, with prop 13, if your house has gone up a lot in value and add a shop that cost 200K, your property tax assessment will go up 200K, even if the actual property value has not gone up that much because even with that 200K increase, your assessed value is probably still less than current market value.

[Michael Schuch]

When I purchased my current place, about 20 years ago, I purchased a shop with a house and some other crap in front of it. I knew at the time that I wouldn't be able to purchase a house and be able to build a shop in any reasonable length of time so a shop was very high priority for me.

[roger wiegand]

A shop, like a swimming pool, may add or subtract value to/from a property unless, perhaps, you live someplace that permits accessory dwelling units and the shop is built such that it is easily converted to living space. I'd assume, at best, a return of 20-30% on money invested in building a shop, in line with most other home improvements. So yes, way better to find a property that already has a shop building.

A shop building is going to have great appeal to a small number of buyers, be a negative to some, and have essentially no value to most. Anything that makes a property "different" will limit the pool of interested buyers.

[Zachary Hoyt]

I don't know. When I bought my house the assessment was high at 72k for a 2br, 1ba, shell that needed to be gutted, with aluminum siding and a good metal roof on the main part, and the kitchen roof and floor about to collapse. Now I have repaired the house and added a bedroom addition, a half bath, and a porch, and built a 16x32 workshop building in the yard, and the taxes have not changed at all. As far as I can tell the old and new assessor have never looked at it. I don't know if I should say something, but so far I have just let it go.

[Maurice Mcmurry]

Lenders, Townships, Insurance Underwriters and Real Estate companies have standard formulas for the value added by having a garage. The value added by accessory buildings is also standardized. Garages add more value than workshops in our area. Location will be a big factor. You can look at comparable properties on Zillo or Realtor.com to get a general idea. In the wrong area the value of a workshop could be diminished by the status cuo. I built a nice garage. Our value added does not cover the added expense of having made it nice. I am also un-able to get affordable replacement cost insurance for the garage-shop. Our insurance company will only insure the garage shop in full as a business with its own policy. Our insurance bill would more than double if we raise the garage value from their maximum, ($6000) to what I wish it was insured for ($100,000).

[Bob Riefer]

Our realtor felt that our 2-story, 25x30 outbuilding more than offset our investment for a couple reasons:

1 - Our space is very versatile (the 1st story could be repurposed as a garage, a yoga studio, a business office etc. And the 2nd story is fully finished as a stand alone apartment)

2 - We managed our costs by doing a lot of the work ourselves (in our case, I saved us over $100K... but any bit of cost offset helps of course)

3 - We live in an area where people want land and utility spaces (this can help with the price, and also with speed-to-sale)

4 - We didn't "overdo it"... The building fits the property, complements the house, and generally is an asset to the neighborhood

[Maurice Mcmurry]

According to the limited wisdom of Zillows Z-Estimate. Our garage shop makes our property worth only $2800 more than the neighbors property with no garage. Our tax assessment increased by a few thousand dollars when we replaced the old garage (16 x 24 metal building), with the 22 x 40, nice residential construction, garage shop. These numbers are based on curbside appraisals. When it is time to sell we will have a real walk-through appraisal done. In hindsight I would have made the shop attic a legitimate apartment in an effort to increase the value added.

[Jim Becker]

My new shop building bumped the assessed value of the property for tax purposes about 10% of the cost of my building and about a grand of taxes. From the standpoint of resale, it will certainly enhance the property value, but by how much will depend on the "when" simply because of how real estate values fluctuate over time. Near term, the bump will not be as much as it likely will be in say, ten years. So "in the moment", I probably would not recover a high percentage of my $50K investment, but that percentage will increase over time, assuming real estate continues to grow in value over that same time.

[Edward Weber]

Location
Out here (and some other areas) basements and attics are a thing of the past. Meaning homes have no storage. Any onsite multi use building is a positive, how much depends on too many things to list.

[Jack Frederick]

Having built a 30x34’ 1000 sq ft shop on our 1.5 ac place and sold it this past Feb there were a lot of discussions about the shop, its value and uses. the shop had a view out to the west that was terrific and there was a 15’ covered deck on it. The new owners a young Dr’s family are cutting it in half with a petition down the center. It had a 10’ ceiling and the windows on that side were set high for bench/machinery access. It being a slab, they are building a 1’ floor which brings the sill height back into residential range. So, to the question. Yes, it is a shop, but can it be built for future multi use? It is worth consideration as you lay it out and with the right “features” there is value there in a sale. How much? That is a trick question

[Michael Burnside]

I built my home 3 years ago. I built an attached ADU of 1k sq-ft for my in-laws and I built a 1.5k sq-ft detached shop. The ADU added 250k to my home value. The shop added 0k. My realtor/appraiser friend told me that shops do add value, without question, and will likely pull in some dollar amount when being sold but they are not strickly something tangible like an additional living space. That said, I did build my shop to have an 18'x12' door so that if I ever sell, someone with an RV or boat could repurpose the space easily. Thereby increasing the pool of potential buyers for my home. I have no plans to sell, but it was a consideration when I built it

If anything, my shop costs me more since I have a rider on my insurance policy to cover all the crap inside LOL.

[Jonathan Jung]

I'm hearing from you all that if I build a shop, the best is to design it such that it could serve multiple uses, and thereby multiple owner types.

Layout could be around 2000sqft of one big open space, maybe 40x60, with an enclosed mezzanine of about 1/3 that footprint, accessible by a nice-looking stair. It would have water, sewage, and electrical, windows of residential height, and only 1 overhead door. The overall look would suit our area, wood cladding, nice-looking doors, steel roof.

Floor would be hydronic polished concrete and sealed, so it would look nice over time.

Someone could use this for an ADU, events space, any kind of work / art / athletics / gallery / studio. As an ADU I think the next owner would just have to limit it to 1000-1250sqft depending which county we buy in.

All this said, we aren't planning on moving, but it's nice to know we sank money into something that's well thought out.

[Jonathan Jung]

I just heard back from my realtor. He thinks a shop could add to the property maybe 75% of it's build cost.

[Michael Burnside]

As an ADU there are a lot of rules/regulations/fire codes (don't get me started on this one)/etc. that you have to work through. Some counties would not even allow a detached ADU unless you meet certain egress/ingress/lot-size requirements. An ADU also requires, at least in Colorado and my county, a completely different division for approval, review and inspection. Trust me, I know this intimately.

That said, thinking about the use cases for other things is a good idea.