Thats an hour from my lake house..
You want to do all the math, the good thing is in that area something like that done right could be worth around XXXXX, the bad thing is they want XXXX, so figure construction around $95 a sq foot depending on what has to be done to the structure to meet code. So if you build a 2200 sq foot home in there the reno can cost you $200K, that puts you a bit over what it would be worth. I would offer *** and have a bit of room...
BUT I love the idea, they do it in iowa a lot, they build a huge barn and then a house inside it, 14ft doors and they pull equipment right in and then go through another door into their house, pretty cool... Nice spot for passive solar and geo thermal hvac ;) ....
BUT do your homework, my office manager is VERY familiar with the local codes from that area if you need any advice, I would imagine you will need double 5/8" sheet rock in the garage if living space is going to be above it and you are going to store vehicles in there... And there may be other codes that you may not think of.
do the math and plan for the future, its a 2x lot, why not build a new place next to it and keep the horse barn all for garage...
good luck with it, let me know if I can give any advice...