The tiny house movement is an increasingly popular social and architectural trend that promotes the idea of living in small homes. In order to be classified as a tiny house, a building structure must be between 100 and 500 square feet. The average cost for a tiny house is $23,000 but prices can range from $10,000 to $40,000.
There are two different types of tiny houses available to investors. We’ve listed them both here:
- Tiny houses on wheels are built atop a trailer and closely resemble RV caravans and motorhomes. However, tiny houses on wheels are designed for long-term, comfortable residential living.
- Tiny houses on foundations are built around a permanent foundation structure. If you are thinking of investing in this option, remember to consult local zoning regulations.
Benefits of Investing in a Tiny House?
While the eco-friendly, minimalist philosophy behind the tiny house movement is commendable, investors are typically more interested in the financial sustainability of the property trend. We’ve listed four benefits of owning a tiny house that an investor can get behind:
You can reduce the cost of labor by building your own tiny house. Take advantage of standardized designs and tiny house shells to simplify the build process. Look out for recycled or second-hand building materials to further lower the construction cost and reduce your ecological footprint.
If your property investment options are limited by funding, building a tiny house is a low-cost method to gain exposure to the real estate market. After building the tiny house, you can sell for capital growth or create a new cash-flow stream by renting the property out.
Tiny houses can be moved as a single unit, allowing investors to transport the properties to high-demand locations. The tiny house movement is most popular in the following states:
Alternate Source of Rental Income
If you own property with a large parcel of vacant land, consider sub-dividing the area into tiny house rental lots. If you can outfit each lot with electricity and water outlets, you can further increase your rental yield.
Downsides of Investing in a Tiny House
Although tiny houses may be a practical housing option for cash-strapped or minimalist buyers, there are drawbacks to investing in this property type. We’ve listed some of the limitations and potential dangers of investing in the tiny house market:
It May Be a Short-Term Trend
Investment fads appear in property and security markets all the time. When it comes to tiny houses, many investors are concerned that these properties are simply high-end travel trailers with housing terminology and marketing attached to them.
Low Market Demand
Despite the popularity of the tiny house movement, the demand from actual buyers remains relatively low. Moreover, the core buyer market, millennial first-home buyers, is not considered a profitable demographic for investors looking for capital growth or high rental yields.
Although the thought of drastic downsizing can sound idyllic, the truth is that most of us have too much personal property for a tiny house. If you have pets or a storage-intensive hobby, the small size of a tiny house can feel constraining and claustrophobic.
Ultimately, the decision to invest in a tiny house should be informed by your financial circumstances, investment objectives, and philosophical outlook. If you need advice on buying or evaluating an investment property, tiny house or otherwise, contact Clever to connect with a local full-service real estate agent.