Tiny houses, single family dwellings of 500 feet or less, have been growing in popularity over the past decade, particularly among retirees looking to downsize and hold on to their pensions, and millennials trying to get out from under the burden of debt.
While some choose to live in tiny houses out of concern for the environment or a desire to strip down to life’s basics, it is the financial benefits that draw the majority of purchasers. The average cost to buy or build a tiny house is hundreds of thousands of dollars less than a traditional dwelling; add in the lower cost of taxes, utilities, and maintenance, and the financial appeal becomes even greater. Do significantly lower costs actually make a tiny house a good investment?
Over the past several years, traditionally built homes have increased in square footage by nearly 1,000 feet. Mortgages, property taxes, and home maintenance costs have also gotten larger, with most Americans spending close to half of their annual income on paying for the roof over their heads.
There has recently been an increased market for custom-built tiny homes. At a cost of around $200 to $400, tiny houses are more expensive per square foot than a traditional home. Many of these costs can be attributed to custom features such as smaller water heaters, toilets, and appliances.
There are other financial savings associated with tiny homes as well. Less space means living a simpler life. With fewer unnecessary expenditures, tiny homeowners find themselves with more disposable income and larger savings accounts. In fact, a higher percentage of people who live in tiny houses have more savings and less credit card debt than the average American.
Just as there are savings, there are also drawbacks to investing in a tiny home. The houses are often on wheels or limited by zoning regulations as to where they can be built, making it necessary to move frequently, rent land, or purchase an expensive property. While there has been an increase in rentable tiny houses as well as fully built tiny home communities that offer cooperative purchasing, securing a traditional bank loan to purchase a tiny house often proves difficult.
As the tiny house movement continues to grow in popularity, so does its acceptance as a viable part of the traditional housing market. Investing in tiny houses has recently been deemed a sound investment by a respected real estate expert, who cites the fully developed communities built in states such as California and Oregon as a sign that tiny house movement is here to stay.
Ultimately, whether or not it pays to invest in a tiny home comes down to your housing goals. If your plans center mainly around saving money, you may want to look at other options before committing to the lifestyle change that living in a tiny house dictates.
Sources: The Tiny Life, Tiny House Community, The Huffington Post, Realtor Mag
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