I want to buy and Rent Tiny homes?? Thoughts?

Question

I’m interested in tiny homes, I think they are just gorgeous and cost efficient! However, due to This I think I’m looking over things? Has anyone started this? What are some issues? What are some great news? I need some insight please!

Mason Hickman · Answer

@Corey Duran

Biggest hurdle in our area is zoning and permitting. They are essentially luxury travel trailers.

Bruce Lynn · Answer

How do you finance them?   Where do you put them?

Do they rent for a premium above alternatives?

Run your numbers, don't fall in love.

Jonathan Greene · Answer

@Joe Splitrock for the win. Hit all the high notes.

The only viable way to scale in tiny homes is to do what Getaway House is doing, but I think they own or lease a lot of the land. I also think that the tiny home fad is way over-glorified on TV. No one wants to live in 200 square feet with a compost toilet all the time, with a partner and a dog. It's not sustainable. I love the concept as a getaway weekend, off-the-grid model, but I think investors may get sucked into the Instagram of it and not the reality.

Joe Splitrock · Answer

The idea has been discussed many times on BP with the following challenges:

1. Zoning and permitting challenges make it hard to develop these type of communities profitably. Very often tiny houses are actually classified as RV instead of permanent structures.

2. Financing can be difficult and most people doing tiny houses are using cash or financing through the company who makes them. This makes them difficult to sell and affects resale value.

3. Cost per square feet is high and return on investment isn't as good as larger properties. You can take the same land and up townhouses or other low cost structures that make better use of the land.

4. Tiny house aims to be low cost living, but is more expensive than multifamily or manufactured homes. This is a marketing flaw of the entire movement that has yet to be addressed. Most of the cost in a living structure is mechanicals, not open space.

5. Tiny house is a lifestyle. This is one reason it fails, because it is a niche living situation. A single person or maybe couple can live like this, but throw a kid into the mix and it is a miserable way to live. People get older, mature and get tired of the life style. Maybe you will get some older people doing it, but really this is very much a niche business. You are looking for people with excess money who chose to live minimalist.

6. The concept isn't new. Manufactured homes are small houses manufactured in a factory to optimize cost. In other words, this has already existed for 75+ years. The only difference in tiny houses is they may be a little smaller and supporters claim they are "higher quality". This just means they are more expensive. There are one bedroom houses in my city built in the 1950's so versions of this have been around forever and never really gain mass popularity.

7. Land use model is not flushed out. Do the tiny houses sit on rented lots like a manufactured home part or do they own the land? Do they sit on foundation permanently or are they on wheels like an RV? If they sit on a foundation, is there deck and garage?

For over ten years people have been trying to flush out this concept. Usually they want to put these houses in a backyard of a house, so they become more of an ADU. In other cases they want to develop a park, which gets into land use and zoning. Is it an RV park or a manufactured home park or do they have small residential lots. I don't think it is great for investors unless it can be an ADU and somehow make better use of existing land. Developing a community makes less sense. Just put up townhouses or an apartment and you will have better ROI.

Timothy White · Answer

Love it !  You can get by some zoning if done right and help the housing crunch with a strategy such as this

Tai with solar providers , composting toilets , and those marine wind generators  . This may help off set the cost through some still existing rebates

This will also help marketing the green effective of your project homing people.

go get em creative one :)

John Majoris · Answer

Hi Corey,

Search out RoBuilt on YouTube for all your answers. He was a BP podcast guest on #492 as well.

Wyatt Franta · Answer

Corey,

Love the idea - I'm looking at the possibility myself. As @Mason Hickman mentioned, they're glorified, trendy trailers in the eyes of a lender. You won't be able to finance them with a mortgage. You can look into builder loans, bank loans, or even RV loans if it meets the requirements.

Land will require 20% down on a 20-25 year loan. Permitting can take forever depending upon your area, material/appliance costs & availability have been fluctuating, and you'll likely need some good protection depending upon where you decide to build.

Great news is that it's still pretty affordable and looks like a great alternative to a standard home. AirBnB will probably eat up your TH when it's back into full swing as well.

I want to buy and Rent Tiny homes?? Thoughts?

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