Planning and zoning will be the biggest issue, depending on your county. Many areas you end up doing the full sewer, fire, insulation, etc and the temp corner of the shed for a home is going to cost mucho bucks, so that you won't be able to afford something new down the road.....
Myself I'd be careful about fumes and such, a lot of that oil, fuel, grinding, welding makes for some interesting fumes floating around the building, not sure I'd want to live in that with the family all the time.
Third issue is insurance, you are putting all your eggs in one basket, fire (more likely in a shop area) is risking everything you own, shop, equipment, home, furnishing, family, all in one roof. That's harder to insure and might be something to think on.
Lots do it and do it well just think it all through.
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Today's Featured Article - History of the Nuffield Tractor - by Anthony West. The Nuffield tractor story started in early 1945. The British government still reeling from the effects of the war on the economy, approached the Nuffield organization to see if they would design and build an "ALL NEW" British built wheeled tractor, suitable for both British and world farming.
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