Own a tiny house as a short term rental? Looking for advice
Member since 2019 · 20 posts · 6 votes
Hi bigger pockets, Im a new investor. Just closed on my first property in a college area and hoping to have it rented out soon. Very excited to start this journey, now I want to explore another idea that Ive always had. Im looking for general advice, and unexpected costs you guys who invest in tiny homes have experienced.
I have one acre of land with no utilities in a college town that is popular to visit. I've always been infatuated with tiny homes and I think it would be a great low cost way to have this vacant land bring in some income. The area is great and near downtown and near a university so I think the potential for airbnb/short term rental is great for sporting events, downtown visits, alumni/parents visiting etc.
Any fallbacks to having a tiny homes as an airbnb that I may not be seeing? So far the costs I have in mind is price of the home, drawing utilities, gravel for the driveway, etc. As well as checking local ordinances.
Please share and advice or warnings through your experiences
@Shawn Wainsely I have one that I personally would consider a tiny house, but if you go by HGTVs standards it has to have wheels and mine does not it's a real house with a crawl space. Mine is all one room the only door is the shower/toilet. the sink is even in the main room. It's 600 sq ft. It grossed just under $37,000 last year.... but I'm also a rock star with well over 1000 5 star reviews. I've run 23 full marathons. I eat lightning and crap thunder.
You can see this property in the link in my profile.
Costs also include changes to your current planning and other risks
There is so many problems with places allowing tiny/alternative houses that unless you are really in the boonies and a really well visited area by short term types, I doubt it is a viable longterm plan
Are you planning on running it dry with no utilities at all? If so, that seems like a less than satisfactory solution to me.
Yes the costs will be low, but unless you are charging 10 bucks a night or something, I can't see people staying anywhere without water/electricity/sewer.
It would make more sense to build a 3/2 home and run with that. Yet more money, but much bigger upside including the after build value.
More details on the area would be helpful.
You have vacant land with no utilities. How are you going to provide electricity? Plumbing? Internet?
Much is made about off-grid tiny homes. Do you know what they actually cost and how those systems need to be maintained and if they're legal in your area? Most municipalities are not going to allow you to have a structure that's not on permitted sewer or septic. If you're going to put it on the grid, how much to bring those systems into your property?
Do you know the local ordinances/zoning requirements for homes? Many require that any dwelling be a minimum of 400 square feet (larger than just about any tiny house). The common "workaround" is for it to be considered an RV, but most municipalities will not allow an RV to be a primary dwelling, it would have to be secondary (meaning you'd need a permanent structure on the property first).
Much is also made about the low cost of tiny homes. So-and-so did one for $10k! ... totally DIY, over the course of a year or so, by treasure-hunting all the things from Craigslist, garage sales, etc. etc. etc. Is that the kind of time and effort you're willing to invest? Do you know how much a (nice) turnkey tiny house will cost you? Probably minimum $60k and make sure you read the fine print re: delivery charges, etc.
Start with the zoning board in your area and take it from there.
I should mention I can gain access to utilities without a problem, what I meant is that there are no utilities set up but I would without a doubt set up electric, water, and sewage with the city.
I'm not planning on building myself, and a nice tiny home seems to sell between $30,000-40,000.
I agree that a 4 bedroom house would be a better investment, but of course a lot more capital is needed for that. Not to mention, it is in an area where investors are already looking to build complexes, so I prefer to have something a little less permanent.
I will for sure go through zoning ordinances and check the legalities and requirements of course.
All good suggestions
It is a rotten idea. If "I can gain access to utilities" means sneaking a second dwelling on an existing house's utilities, you have a very real chance of illegal zoning.
What is so hard about getting a real lower end house rather than flushing time and money down the toilet?
Im not sure why the responses im getting are about not having utilities or drawing them off a second dwelling illegally. Im talking about legally having power lines run on to city's grid, connecting a main water pipe, natural gas hook up, etc. The property is not in the boonies, its on a paved road with houses nearby in an area thats already quite developed.
As far as what is so hard about getting "real lower end house" goes im not sure what that means, do you mean building a very lower end house? Or going the manufactured home route (which I did think about).
As I mentioned I already purchased a nice home close to here. My capital is tied up in that home and I have a vacant property sitting there not being used and the demand for short term rentals decently high in this city, a concept tested by other 1bed/1bath small cottages. Seems like low barrier to entry compared to building a "lower end" home. Which, if I were to build a home on the property I think it would be worth doing right.
It is a rotten idea. If "I can gain access to utilities" means sneaking a second dwelling on an existing house's utilities, you have a very real chance of illegal zoning.
Would love to hear your reasoning for it being a rotten idea, ignoring zoning issues and assuming setting up a tiny house here would be compliant with the city and legally be set up for utilities.
I like the idea - my main advice would be to try to design it to maximize guest count, eg at least 2 vs 1 person comfortably. That way couples are in play.
Shawn, that's an intriguing idea. While I can't speak to the financial merits of the plan, it might be worth reaching out to owners of tiny homes who are renting them out on Airbnb to gain some strong and diverse perspectives. And for that matter, if your plans progress, it might be worth taking a bit of a road trip and specifically staying in some tiny home rentals to gain a better understanding of the visitor experience.
On a side note, I'm curious what type of insurance policy you'd need/be able to find for your intended use of the tiny home. Best of luck!
I am not saying that it is a rotten idea. What I am saying is that the expense to bring utilities in (from the street right in front of the property) is usually a low 5 figure cost. Sewer hookup can cost 10k plus alone.
We don't know where the property is at so it is hard to give the best advice. Personally, if I was going to all the expense to bring in all the utilities, I would build a home to the standard of the neighborhood instead of a tiny home. You would most likely have a bunch of equity from the beginning. A tiny home will be considered zero value in appraisals.
It is really going to be dependent on the location. Will the area allow tiny homes, which is usually classified as a mobile home? How about a modular home? Factory built? There are some great packages out there for a spec house that could be build fairly easily and cheaply vs a custom design.
You might want to look at hard money to complete the project. Short term building loan then convert to standard mortgage after it's done with the equity.
This is all assuming that the area supports the value. More info would be helpful.
You have vacant land with no utilities. How are you going to provide electricity? Plumbing? Internet?
Much is made about off-grid tiny homes. Do you know what they actually cost and how those systems need to be maintained and if they're legal in your area? Most municipalities are not going to allow you to have a structure that's not on permitted sewer or septic. If you're going to put it on the grid, how much to bring those systems into your property?
Do you know the local ordinances/zoning requirements for homes? Many require that any dwelling be a minimum of 400 square feet (larger than just about any tiny house). The common "workaround" is for it to be considered an RV, but most municipalities will not allow an RV to be a primary dwelling, it would have to be secondary (meaning you'd need a permanent structure on the property first).
Much is also made about the low cost of tiny homes. So-and-so did one for $10k! ... totally DIY, over the course of a year or so, by treasure-hunting all the things from Craigslist, garage sales, etc. etc. etc. Is that the kind of time and effort you're willing to invest? Do you know how much a (nice) turnkey tiny house will cost you? Probably minimum $60k and make sure you read the fine print re: delivery charges, etc.
Start with the zoning board in your area and take it from there.
Great and thorough answer, the dwelling size could be an issue. I know rvs are not allowed by zoning so that loophole which is the one most tiny house owners use would not be applicable.
I am not saying that it is a rotten idea. What I am saying is that the expense to bring utilities in (from the street right in front of the property) is usually a low 5 figure cost. Sewer hookup can cost 10k plus alone.
We don't know where the property is at so it is hard to give the best advice. Personally, if I was going to all the expense to bring in all the utilities, I would build a home to the standard of the neighborhood instead of a tiny home. You would most likely have a bunch of equity from the beginning. A tiny home will be considered zero value in appraisals.
It is really going to be dependent on the location. Will the area allow tiny homes, which is usually classified as a mobile home? How about a modular home? Factory built? There are some great packages out there for a spec house that could be build fairly easily and cheaply vs a custom design.
You might want to look at hard money to complete the project. Short term building loan then convert to standard mortgage after it's done with the equity.
This is all assuming that the area supports the value. More info would be helpful.
Good point, building would be a great way to go but takes a lot more capital than I have at the moment. I have looked at modular homes, which would bring in more rent; still takes a bit more capital but not too much more and not quite as much as building a solid foundation home.
Insurance policy is a great consideration that I didn't think about. Good idea with contacting other airbnb tiny house owners.
Also a good point on maximizing guest space, I would definitely pick one that allows at least enough space for a couple.
Side note: Im not sure if you can multi quote on this forum so sorry for the multiple posts
Shawn, I tried to do something similar as you described in Seattle. What I thought would be easy turned out to be a headache. Everything was going to plan until my side sewer permit was denied. I currently have my 3 tiny homes at a mobile home park until I get long term plan setup. If they do well at the mobile home park I will keep them there. My fall back options are to sell them or wait until tiny homes are considered a legal dwelling in the state come 2020 which should allow me to get sewer permit. Key learning is do all homework upfront before buying/building. I bought mine from an existing air bnb business that the owner was retiring and needed to sell. I took the risk knowing I could always sell to minimize downside. If you move forward have an exit strategy just in case.
On a separate note I use proper insurance for the tiny home insurance.
There is a tiny home on Airbnb in my market. It's losing money. I can tell when I look at the reservations and reviews. Occupancy is probably 5-10%. A bank vice president also told me that they are a big money loser for the owner.
But every market is different.
I don't have any experience with tiny homes but a developer in my area is putting some near a ski resort. It will be setup like a campsite where each tiny home has hookups. They will be available on Airbnb for cheaper than the chalets but still close to the ski resort. There seems to be excitement and "buzz" around town about this development. Personally, I think its more of an experience stay for short term rentals. You do it once just to say you stayed in a tiny home. Good luck if you move forward with it!
I don't want to invest in potential problems.
Note the original post saying "I am a new investor and I am infatuated with tiny houses." Not even sure if this person has been a long-term landlord. This is an especially important time not to be foolish.
I see absolutely no reason to swim around in unneeded risk.
This is like a run of the mill tree house. Potential zoning, utilities, fad and other problems. In 5 years, no one may be interested. Or code enforcement/zoning may shift on you and make it untenable. You are not always be grandfathered.
@Shawn Wainsely I have one that I personally would consider a tiny house, but if you go by HGTVs standards it has to have wheels and mine does not it's a real house with a crawl space. Mine is all one room the only door is the shower/toilet. the sink is even in the main room. It's 600 sq ft. It grossed just under $37,000 last year.... but I'm also a rock star with well over 1000 5 star reviews. I've run 23 full marathons. I eat lightning and crap thunder.
You can see this property in the link in my profile.
I agree with @ashleykehr that there is a buzz about tiny houses.
We stayed in this hotel https://shelterednook.com/ in Tillamook Oregon and I was able to talk to the owner. She said most guests stayed because they are tiny homes, not in spite of it. They were heavily booked 6 months in advance at a price higher than low end hotels. It was nicely appointed with WiFi, personal barbecue, shared campfire area, in room heaters etc. Selling more of an experience than just a place to stay.
Of course each market is different and as others have pointed out the zoning/rules could be deal breakers. They are in my home town, Bend Oregon.