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Buying a house to use as a Lego warehouse


landphieran
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I have been trying to find warehouse space near me for a couple years now. Most locations are a 30 minute drive on a good day. Rent runs 1500$ for 1200-2000 sq ft. I live in a medium size metropolitan city which doesn't have very much commercial space. Without going too much into the details I haven't been impressed with the warehouse options available to me.

I am now considering purchasing a home near me in a lower cost area of town and using it as a Lego warehouse/shipment location. With current interest rates I could snag a 1300-1600$ mortgage and have a 2000sq ft place to run my business. I could always rent it out if I found a better option. My financial situation is pretty good so I'm not worried about being stuck with 2 mortgages.

Does this sound insane? Am I missing anything? Are there any tricks for securing a second mortgage with the intention of using it for business?

 

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I've heard of someone else doing this - they literally brought the house next door.

You're right, rates are pretty good. Though a house may require more ongoing maintenance? 

Will be interested to hear how you get on!

 

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I have been thinking the same thing.....outgrown the current house and need a another one for all the LEGO.  A bonus would be more garage space as I want to garage more of my vehicles.

The only thing I would say is have a long term plan.  Most houses don't make financial sense until 5 to 10 years in.  Life can change.....Do you see yourself 1: Doing the LEGO reselling thing long term? and 2: what is your life going to be down the road in some years (job, happy with the area, family, budgeting etc?

For me I am only working in my current location for about 6 more years until retirement at the ripe old age of 39 :P.  I don't intend to stay here so I purchased my current house as a rental property for some retirement income in the future.  I can justify a second house to be eventually another rental house.

Think it through, take your time, calculate out a budget, plan for things to go wrong and reason out a smart plan. 

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2 hours ago, landphieran said:

I have been trying to find warehouse space near me for a couple years now. Most locations are a 30 minute drive on a good day. Rent runs 1500$ for 1200-2000 sq ft. I live in a medium size metropolitan city which doesn't have very much commercial space. Without going too much into the details I haven't been impressed with the warehouse options available to me.

I am now considering purchasing a home near me in a lower cost area of town and using it as a Lego warehouse/shipment location. With current interest rates I could snag a 1300-1600$ mortgage and have a 2000sq ft place to run my business. I could always rent it out if I found a better option. My financial situation is pretty good so I'm not worried about being stuck with 2 mortgages.

Does this sound insane? Am I missing anything? Are there any tricks for securing a second mortgage with the intention of using it for business?

 

 

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1 hour ago, vincevaughn said:

The only thing I would say is have a long term plan.  Most houses don't make financial sense until 5 to 10 years in. 

This is the key, IMO.

It makes perfect sense for many different reasons. Not positive on this, but interest/insurance rates may be a bit higher because it's not your primary residence?

On a side note, it's topics like this that make me realize I am a small fish in a big fish game.

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I've read too many horror stories of people being cleaned out of their whole collection from an off-site storage solution to think this is a good idea. I suppose it'd be easier to set up a house with remote cameras and an alarm system than a rented warehouse space. Also consider what a strange sight you'd be to your new neighbors and even whether it'd be legal to use the home for purely business use in your town. There are also the tax considerations, I'm not a CPA, but if YOU owned the home in what way does your business claim deductions for it?

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1 hour ago, Mathew said:

Have you looked into storefronts?  I bet you could find something cheap to lease. 

This is a good idea. 

And to echo what others have said regarding theft, sure invest something in security, but definitely get insurance specifically to cover what you have stored at your new location.

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1 minute ago, minicoopers11 said:

This is a good idea. 

And to echo what others have said regarding theft, sure invest something in security, but definitely get insurance specifically to cover what you have stored at your new location.

any recommendation on a good insurance company for this?

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In my town, I would expect this idea to run up against zoning laws.  Running a commercial entity out of a residential zoned building is hard unless it's one's 'home office'.  I'd personally consider KShine's approach if I were so inclined to follow this path.

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Buy a bigger home (for living and for LEGO), and rent out your current home - your future self will thank you.

We just bought a new house and made sure there was room on the property for a detached garage (Lego warehouse). It might not be great in all areas/school districts, but it was a high priority in our home search.
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Funny,  I had this conversation with my wife recently.
I found a warehouse "condo" very near my house for around $150k. I thought it would be a good investment, maybe in 5-10 years when I'm done with this, or move after kids go to college, I could sell it. I thought of all the money I could save on renting storage, and profit off selling the unit later.

But my wife said, for $150k you can buy a house and it will likely appreciate more in 10 years than the warehouse.
Great idea! But a house and store lego in it!
She countered, not to store Lego, if you can buy a house, just rent it and make income instead of paying to store Lego: insurance, taxes, utilities...
You can still sell it in 10 years and make even more profit.
 

Sigh... too big for my home, too small for anything else.

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I'm not a super large seller. I run this part time by myself and my partner helps when I need it.

Insurance: Homeowners insurance technically doesn't cover it, but umbrella insurance should. I am currently looking for a CPA (if anyone knows a good one PM me). I think you should be able to write off the home costs as business expenses since I wouldn't be living their.

Renting: I agree with @donbee that renting it out would make a lot of financial sense. My ideal property has an exposed basement and a large garage. I would rent the top floor and block off the basement/garage. Make the rent very reasonable to tolerate my shenanigans.

Security: I live in a good city in the midwest with ultra low rates of crime. People still leave their cars, home and bikes unlocked.

I see a lot of people like @KShine's advice. I currently use about 1500-1700 sq ft of my 2500sq ft house to run my business, plus a 300sq ft storage unit to store overflow. Houses in my area don't get much bigger then 3500 sq ft. and command a huge premium. They also tend to be in swanky parts of town that would bring a lot of heat from neighbors.

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Not sure about the US housing market, but in the UK this would be a very bad idea. It is expected that house prices will be falling at least 10-15% due to the upcoming recession, with alot of people already losing jobs, with the unemployment rate predicted to go up to 15%, along with the current government furlough schemes ending in October.

It could turn out fine, but I personally would prefer to keep lego as a side job and focus on my "real" job as the main earner, understand it may be different for you and everyone has different circumstances etc.

Just make sure you do the sums and take into the unexpected when buying a house i.e. boiler breaking / roof issues / bad wiring etc, things always seem good in the house report, then you move in and the repairs / upkeep.never finish...

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1 hour ago, Voltron said:

Not sure about the US housing market, but in the UK this would be a very bad idea. It is expected that house prices will be falling at least 10-15% due to the upcoming recession, with alot of people already losing jobs, with the unemployment rate predicted to go up to 15%, along with the current government furlough schemes ending in October.

It could turn out fine, but I personally would prefer to keep lego as a side job and focus on my "real" job as the main earner, understand it may be different for you and everyone has different circumstances etc.

Just make sure you do the sums and take into the unexpected when buying a house i.e. boiler breaking / roof issues / bad wiring etc, things always seem good in the house report, then you move in and the repairs / upkeep.never finish...

This is probably the biggest driver on this.  The local housing market and area you are in.  Like the OP I am in the midwest US were housing is cheap, crime is low and home business laws are light.  Different areas have far different environments so your results may vary.

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13 hours ago, landphieran said:

I have been trying to find warehouse space near me for a couple years now. Most locations are a 30 minute drive on a good day. Rent runs 1500$ for 1200-2000 sq ft. I live in a medium size metropolitan city which doesn't have very much commercial space. Without going too much into the details I haven't been impressed with the warehouse options available to me.

I am now considering purchasing a home near me in a lower cost area of town and using it as a Lego warehouse/shipment location. With current interest rates I could snag a 1300-1600$ mortgage and have a 2000sq ft place to run my business. I could always rent it out if I found a better option. My financial situation is pretty good so I'm not worried about being stuck with 2 mortgages.

Does this sound insane? Am I missing anything? Are there any tricks for securing a second mortgage with the intention of using it for business?

 

Not sure how much this is possible in your situation, but I heard lately that those large unified sea containes 20/40 feet approx are either for sale or rent for ridiculous prices given the drop in sea cargo trading due to the Virus. They provide sufficient break-in protection, lots of square footage, not sure about dampness / humidity its also based on an exact location, but surely they can always "insulated" from outside, have something built around it etc.. I guess those would be the cheapest storage unit one could get these days.

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