Alternative housing can be a great way to diversify an investment portfolio. It’s typically cheaper and less competitive than traditional housing, and its use is more flexible. Barndominiums, or “barndos,” are a particularly trendy form of alternative housing that can be a lucrative addition to your portfolio, provided you understand what you’re getting into. Let’s take a closer look at the unique concept that is the barndominium and a few pros and cons if you are considering investing in one.
What Is a Barndominum? Why Do They Call It That?
A barndominium is a residential structure that combines elements of a barn and a condominium, which is where the name comes from. Originally, the term described metal barn structures that included living quarters. Today, barndominiums can range from simple metal buildings with living space to luxurious custom homes featuring open floor plans, high ceilings, workshops, garages, and extensive acreage.
Most modern barndominiums are built using steel-frame construction. Their design emphasizes functionality, durability, and flexibility while offering a unique rustic aesthetic that appeals to many homeowners and investors.
What Are the Benefits of a Barndo vs Traditional Home?
Barndominiums offer several advantages compared to traditional homes:
Lower Construction Costs
Barndominiums cost less per square foot to build than conventional houses. Simpler structural designs and faster construction timelines can reduce labor and material expenses.
Faster Build Times
Many barndo projects can be completed more quickly than traditional custom homes, especially if you’re using prefabricated building systems or kits.
Flexible Floor Plans
Barndominiums are known for large open spaces that can be customized to fit virtually any lifestyle or business need.
Durability
Steel-framed barndominiums are resistant to pests, rot, and many weather-related issues that affect wood-framed homes.
Low Maintenance
Metal siding and roofing generally require less maintenance than traditional exterior materials.
Are There Any Drawbacks To Barndominums?
While barndominiums offer many benefits, they’re not without challenges.
Financing Can Be More Difficult
Some lenders have limited experience with barndominiums, which can make financing more complex than a conventional home purchase.
Zoning Restrictions
Certain municipalities and counties may restrict where barndominiums can be built or require additional approvals.
Appraisal Uncertainty
It can be hard for sellers to find comparable sales. This can lead to a conservative market listing that doesn’t reflect the build cost. Similarly it can be hard for buyers to get approved for a mortgage if the lender doesn’t agree with the value.
Insulation Demands
Metal conducts temperatures very efficiently, which means it will direct both heat and cold directly inside the home. This means insulating a metal building may be a little more complicated/costly that a stick built home.
Do You Need to Own The Land To Build Barndominiums?
In most cases, yes. Barndominiums are typically constructed on privately owned land. Before beginning construction, you’ll need to check the property is properly zoned and meets local building requirements.
If you don’t currently own the land, many buyers purchase acreage first and then secure financing for construction. Land ownership is often the first step in the barndominium development process.
What Is Meant by a Barndomium Kit?
A barndominium kit is a pre-engineered building package that includes many of the structural components needed for construction. Depending on the manufacturer, a kit can include:
Steel framing
Exterior walls
Roofing materials
Doors and windows
Engineering plans
Hardware and fasteners
A kit typically doesn’t include interior finishes such as plumbing, electrical systems, drywall, flooring, cabinets, or appliances. Buyers still need contractors to complete the living space unless they plan to perform some of the work themselves.
Can You Convert an Existing Barn Into a Barndominium?
Many property owners can convert existing barns into residential living spaces. However, converting a barn often requires significant upgrades, including:
Foundation improvements
Structural reinforcement
Electrical installation
Plumbing systems
HVAC systems
Insulation
Compliance with local building codes
Before purchasing a barn for conversion, it’s extremely important to have the structure professionally evaluated to determine the feasibility and cost of renovation.
What Is the Investment Potential For Barndominiums?
Long-Term Rental Properties
Large floor plans and lower ownership costs can create strong cash-flow opportunities in certain markets.
Appreciation Potential
As demand for rural living and flexible housing options continue to grow (especially as the demand for work from home opportunities expand), barndominiums may experience appreciation similar to traditional residential properties, particularly in desirable areas.
Lower Operating Costs
Durable materials and lower maintenance requirements can help investors reduce long-term ownership expenses.
Mix-Use Opportunities
Some investors use barndominiums for residential and commercial purposes, which means additional income streams through workshops, storage, agricultural operations, or home-based businesses.
How Do You Finance Barndomiums?
Financing a barndominium depends on whether you’re purchasing an existing structure or building a new one. For complete barndominiums, traditional mortgage options could be available, but lender requirements can vary. For new construction, borrowers often use:
Land loans
Construction-to-permanent loans
Bridge loans
These are all types of hard money loans. Hard money lenders evaluate the project’s potential to generate income as opposed to the borrower’s current financials, credit score, etc. Hard money lenders are familiar with unique property types, which can make the process significantly smoother and faster than a traditional loan.
That being said, a hard money loan is not considered a long-term solution. You can use a hard money loan to snap up a competitive piece of land and get your new-build started while you await longer-term financing.
Colorado Land Loans and Bridge Loans
If you’re considering buying or building a barndominium in Colorado, securing the right financing is one of the most important steps. Whether you need a land loan to purchase acreage, a bridge loan to transition between properties, or guidance navigating the construction financing process, Pinetree Financial can help.
Our experienced lending team understands the unique challenges associated with rural properties, custom construction projects, and non-traditional homes. Contact us to explore Colorado land loans, bridge loans, and financing solutions designed to help bring your barndominium investment to life.