Tiny Home Market?

57 Replies

Hey everyone,

New member here and as my first post I'd like to pose a question about the tiny house market. Let start of with a bit of background....

I'm a local metro Denver Realtor who has been licensed for less than a year and been with my brokerage (Dwell Denver Real Estate) since April/May 2014. Over the previous 12 months I've been educating myself on the local Denver market which has lead me to BP. 

Over the last few months I've become highly interested in investing, specifically flipping but also rentals, wholesales, buy & hold etc... That being said I'm starting at ground zero with little to no money and no experience whatsoever. I've recently approached my father, who has had some experience in flipping as well as new construction, about the possibilities of partnering for my first flip here in Denver. *Sidenote: My family lives in Connecticut which is where I grew up which means accessibility is an obstacle. 

We've discussed the tiny home market for some time as it is what I want to get into personally and have even attended workshops in Boulder and Colorado Springs to further quench my interest. Anyway, in discussing the possible flipping partnership with my father he mentioned an idea that I thought might be a good topic of discussion for the BP community. 

In a nutshell the idea is to buy a small plot of land somewhere within Denver/Boulder/Jefferson county, build a tiny home (400-600+sq ft) and list it. He thinks that there is a market, especially within Colorado, that makes it worthwhile. I'm involved and interested in the tiny house community here, however as a local Realtor I'm skeptical about it being attractive to buyers and would rather put the time and capital into rehabbing and flipping. I do believe in finding a niche market but I'm not sure that this is the right start. 


I'm also aware of the issues involved in building a tiny home in certain counties and everything that comes along with it. 


Anyway, if anyone has suggestions, comments or ideas about this let me know. 


Thanks!

Welcome! My immediate thought is, unless you're building the really tiny houses (~200 sq/ft) I've seen on trailers that are still "mobile" so you get around most/all building codes, many of your costs will still be the same. Land acquisition, permits, foundation, utilities, architect, and on and on but without the additional benefit of profit on the larger sq/ft you'd be selling. In short, it probably costs nearly the same (relatively speaking) to build a 600 sq/ft house as it does to build a 1200 sq/ft house but you get much less spread. I know, materials are double but the materials that double are flooring, paint, drywall, etc. You're still putting in a kitchen, bath, HVAC, electrical, etc. which are your larger cost items. Adding a bedroom or two is much cheaper per sq/ft than kitchens and baths. Hope I'm making sense?

Rick, Great topic. I think most zoning makes little houses impractical. Only because you have to buy a rather large piece of land to put a really small house on. But every once in a while you see a very small lot come available in Denver and that may be worth a look at.

Of course as a realtor you can look at the real data. How many homes under 900ft are sold (and not flipped again with larger foot prints) in the market. I find that I buy small 700ft houses to put additions on to. They are easier to find because their is not a high demand for that size house.

While a very intriguing Green idea, I am not sure it is really viable. Small houses work or singles and couples. But I doubt many families will be in that market. While 4000 ft house may be considered to large I think 600ft may be considered to small.

I agree with @troy s to a extent, however I must that there is a market for small 2 bedrooms here that the younger professionals without kids are snatching up and they are willing to pay for them. 

@RIck Montanari  

 Besides checking for demand, I would check zoning to see what is permitted.  Some zoning has minimum square footage like 1,000 sq ft.  Other zoning doesn't permit more than 1 house per lot in some zoning.  Also check setback requirements and off street parking requirements.

@Troy S.  

  Being mobile doesn't get around all zoning.  Some zonings specifically ban mobile homes.  And some prohibit travel trailers/RV in certain zoning, that's what causes people to store their RV at min-storage places.

There is a lot of publicity for Tiny Houses with various TV shows on several channels, but municipal zoning often lacks the latest fad.

I've been curious about this as well, not sure that the numbers would really support it. However, in a green, trendy area - I'd think that having them as rentals would be worth looking at. If you could find a way to create a tiny "village" - maybe an upscale, green RV park as far as ordinances go - but location would have to be prime - biking distance to downtown Boulder? (For me, in NJ, it would be biking distance to Princeton, but the likelihood of Princeton okaying an RV park?). Anyhow, no real research, just thoughts. 

Welcome Rick. I too have been thinking about the tiny home trend and how it could be applied in Denver. I think most people looking for tiny homes (especially single millennials) are drawn not to tiny houses but tiny condos in Denver. There are a lot of small square foot condos in buildings built in the 1920's that are in the city central neighborhoods (Park Hill, Congress Park, Capitol Hill) that are attractive to the young urbanites. Converting apartment buildings  (made up of 300-600 sq ft units) that have lots of character and close to downtown to condos was very popular in the boom times (pre 2008). Perhaps apartment building to condo conversions will make a comeback to address this tiny home market trend? I wonder also if tiny home building would work better in the less urban areas of Denver (Evergreen, Conifer, Idaho Springs), however these areas already have quite a bit of tiny homes already in the form of old cabins. Maybe one way would be address the tiny home market would be to fix up the old cabins in these areas, make them energy efficient (most of these cabins were built for summer use only)  and market to people that want tiny homes.         

@RIck Montanari  Try to find comps.  That's (as you know) the best way to see if there's a market for a home like that.  I suspect you may have issues selling, but there's a price for everything.

I am experiencing a LOT of demand for small homes &/or apartments that tenants are prepared to pay $700- $800/month regardless of utilities.

The majority of enquiries are from older singles who are still working to support their social security & just want a safe, comfortable humble place to reside in. 

A local BOCES college built a 900 sq ft 'modular' home & auctioned off for $42,000 & I bet we could have built it for half that. Around here small in fill lots, with all the utilities at the road, can be had for $15,000-$20,000.

Thanks for all of the responses. I'm fairly educated on the zoning & building issues in Denver county, matter of fact from what I've been told the city does not permit what would considered tiny house size. @Troy S.   As far as mobility goes, this is what I'm personally hoping to accomplish in my life outside of real estate, there are plenty of resources (tumbleweedtinyhouses.com) that provide information regarding the legalities of what is considered to be a "mobile" home and everything involved on that end of things. What I'm wondering about are the 400-600 sq ft homes permanently attached to the ground, not necessarily the way to get around codes, but the actual market for newly built homes of this size.

My father's thoughts were pretty much the same as any tiny home enthusiast. Consolidated, simple, easy living, saving money and being more economical than todays standard. This could be middle aged couples looking to downsize, young adults looking to be mobile and save some cash - especially around this rental market in Denver- or people who may have been in some financial issues who are finding it hard to be approved to rent or get a loan, etc... 

@Tom Spaeth   Great suggestion, I'm going to do some research on Metrolist tonight! 

@David Krulac  Will be looking into both of those requirements as well.

@Ceril S.  I've been playing around with that idea for some time. I think the issue would be finding the right place, I shared property with a mobile home park during the 3 years I lived in Boulder and the bike path runs throughout the city so that might be something worth looking into! Thanks!

@RIck Montanari :

Sorry- haven't had time to read all of this thread (and have to get back to work also)...

This is something I've considered- but possibly a slightly different way.  Small homes- but prefab homes.  On Ebay (I know...   Ebay???) there are several designs that are below $20K delivered.  Of course- you need to buy land, utilities, foundation, etc... etc...  Also building codes, etc...  need to be looked into also.  But looks like an option.  I haven't run all the numbers yet, but It appears like a solid cashflow option...

A few of my "almost" deals have had extra lots attached, so this is something I'm looking into to put that vacant land to use- if I close a similar deal in the future...

thanks,

Jimmy

@RIck Montanari  Affordable housing is coming up more and more here in Denver metro in the news, etc. The tiny house thing could help this issue. If you were really gung ho about it, you could approach the city looking for grants, etc and lobby the city to allow them. Just brainstorming here. 

@RIck Montanari  the only way to make this work is to find a piece of land that is unbuildable for any other size unit other than a tiny house. The challenge is to find one where someone interested in tiny houses would want to live (urban core). You can obviously put a tiny house on any property but the rule for new development is 20-25% of the final sale cost in land. So a 600 sqft home selling at $300 per square foot means a $180k property. That means the most you could pay for land would be $45,000. Not much land at that price so you either need to head to the fringe where the cheap land is or find property that can't be used for a 1,200 sqft home (sale price $360,000 land cost of $90,000)

As @Dan McDougall mentioned there are not an insignificant number of small condos <600ft^2 in the market.

The MLS has two small homes in Globeville. They appear to be shacks and are listed at $73k and $130K. If that's the price point it doesn't leave a lot of room for land costs for new construction. Perhaps you could have your Dad invest in a flip of a tiny home or condo and test the market that way.

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@RIck Montanari  I think this is a really cool idea!  I'm don't know about the logistics so much, but I think it is something buyers would be attracted to in our community!  First of all, there are a lot of people who can't afford anything in the Denver-Boulder area right now, so this could be a good option for them.  Also, there are a lot of people who are interested in the minimalist/mountain lifestyle and come to colorado specifically for that purpose.  There are also a lot of benefits surrounding sustainability with those tiny houses and Colorado loves the environment and preserving natural resources.  I would make them look super spiffy and rustic, appeal to the younger mountain focused crowd and put them in places where they like to be.  As @Dan McDougall mentioned, it might be worth exploring other locations for your little community like the foothills (golden, evergreen) or some front range mountain towns.   People might even use them as affordable mountain homes during ski season.  Again, not sure what the logistics are on something like that, but I think with the right location and targeted marketing, this could be a hit!  Good luck and welcome to BP!

I looked on Amazon and there are a surprising number of books on "Tiny Houses", none of them written by me!

Hi @RIck Montanari  

I'm your target customer and I've been looking for land to build a Tumbleweed tiny home here for more than a year.  @Troy S.  and @Bill S.  are right on about the upfront capital costs - $50k land, $30k water/sewer tap, $150/sf construction and you're already into the $180-$200k single family range.  I've looked for scrapes that come with a w/s tap already and think there's some potential there, but you're already back up to an average of $75k - almost the same as raw land with the new taps.

I think your best bet might be to find a community willing to rezone a large parcel to try out the density you're describing. A PUD zone would allow this type of flexibility and might get you reduced tap fees akin to a condo rather than SFR. I also think there's some value in going after property owners with surplus land (~2,000-3,000 sf) that would be willing to subdivide, IF you could get the city to approve a sub-standard lot size. With median home prices in Jeffco hovering near $300k (and higher in western areas and Boulder), I think there's an opportunity to market to young professional couples, singles, and some empty nesters.

I dig the concept and would love to help if a former city planner like myself could be of assistance..

I know of  a few street filled with these types of houses you are talking about.  They are in Warren MI outside of Detroit.

500-600 sq ft.  Must be some kind of market for them.  People are living in them.  Not sure what they rent for

http://www.zillow.com/homedetails/21311-Marie-Ave-Warren-MI-48089/83589667_zpid/

http://www.zillow.com/homedetails/21916-Panama-Ave-Warren-MI-48091/83703641_zpid/

http://www.zillow.com/homedetails/2831-Emmons-Ave-Warren-MI-48091/83642334_zpid/

Here are a few.  They are real cheap around here

What about tiny house rentals? If you could find a vacant parcel with electric then you could buy say 3 of Tumbleweed's tiny homes "To Go". They finance at 6% for 15 years with 10% down. Say you got one each of their "Elm" 18', 20' and 24' for some variety. That'd be $1391 per month for the homes. If people will really pay $800/month to live in these things then you're grossing $2400/month and clearing a little over $1000. If you have decent terms on the land with low property taxes, add some insurance and you should still be able to cash flow easily. I can't imagine maintenance on brand new tiny homes would cost much, especially if you did composting toilets and rerouted any grey water to a garden or something you'd have no plumbing to worry about. 

This may only work in a place like Colorado where there is a more established tiny home community and the people are generally a little "crunchier", but if you paid down the homes as fast as possible you could have a real cash cow. I imagine people who dig the tiny home movement may want to rent for a while to see if they really like it before making the leap. I'm sure I missed a lot of potential pitfuls, but does anyone think this kind of idea might have legs in the right market? Especially for @RIck Montanari  if he already has an "in" with the tiny house community. Just kind of thinking out loud here

@RIck Montanari  

You might be interested in this architect's website.  He's at the forefront of building "pocket neighborhoods".  Small houses in closely built little enclaves.  He has some interesting plans and his houses sell for premium $/sq ft.

rosschapin.com

Originally posted by @Jay Phillips :

@RIck Montanari  

You might be interested in this architect's website.  He's at the forefront of building "pocket neighborhoods".  Small houses in closely built little enclaves.  He has some interesting plans and his houses sell for premium $/sq ft.

rosschapin.com

The key with this type of RE is to keep it priced high.  You want a certain type of of people to live in those.  Otherwise it may as well be a mobile home park.

I know that sounds terrible to say but lets stick with reality

Originally posted by @Pat L. :

I am experiencing a LOT of demand for small homes &/or apartments that tenants are prepared to pay $700- $800/month regardless of utilities.

The majority of enquiries are from older singles who are still working to support their social security & just want a safe, comfortable humble place to reside in. 

A local BOCES college built a 900 sq ft 'modular' home & auctioned off for $42,000 & I bet we could have built it for half that. Around here small in fill lots, with all the utilities at the road, can be had for $15,000-$20,000.

Just my opinion but I agree that there is a market for smaller homes for the older single and empty nester markets.  Once we get past this energy bubble and cost return to their economic levels, maintaining a <3000sf home just doesn't make sense when the kids have established themselves.  I think the true tiny house market (>600sf) may be a fad but >1000sf can be very comfortable and much easier to maintain.  Building technologies that allow for flexible floor plans that can be easily changed along with low maintenance and high energy efficiency is where I am trying to define a model.  This also has the benefit of fitting into most inner city neighborhoods where reclaiming lots is possible.

Originally posted by @Roy Oliphant :

Just my opinion but I agree that there is a market for smaller homes for the older single and empty nester markets.  Once we get past this energy bubble and cost return to their economic levels, maintaining a <3000sf home just doesn't make sense when the kids have established themselves.  I think the true tiny house market (>600sf) may be a fad but >1000sf can be very comfortable and much easier to maintain.  Building technologies that allow for flexible floor plans that can be easily changed along with low maintenance and high energy efficiency is where I am trying to define a model.  This also has the benefit of fitting into most inner city neighborhoods where reclaiming lots is possible.

 Back in my days based in Germany & France there were enclaves of these very small  summer 'cottages' used as get-aways as the majority lived in cramped apartments in the city. Those in & around Munich were very small with the kitchens predominantly outside. I was always impressed by the cleanliness & upkeep of the homes as pride of ownership was very evident. Just out of La Celle-St-Cloud, Paris the 'cottages' were on a small island & had thatched roofs & the buildings & gardens were very well kept. Geese wandered the site only to be made into dinner & exquisite Foie gras at a later date.

In & around Pula Yugoslavia their 'vikendica' (cottages) were also escapes from the inner city & again the kitchens were predominantly outside. In fact the one I always stayed at was under an old Fig tree outside & the Burek for breakfast was to die for. Given the poverty level there at the time I was impressed with the upkeep & ingenuity they showed in doing repairs. 

So these 'enclaves' don't necessarily need to degrade into 'trailer parks'.

Originally posted by @Ceril S. :

I've been curious about this as well, not sure that the numbers would really support it. However, in a green, trendy area - I'd think that having them as rentals would be worth looking at. If you could find a way to create a tiny "village" - maybe an upscale, green RV park as far as ordinances go - but location would have to be prime - biking distance to downtown Boulder? (For me, in NJ, it would be biking distance to Princeton, but the likelihood of Princeton okaying an RV park?). Anyhow, no real research, just thoughts. 

 See, developing a tiny home village is what I really think would be awesome. In a place like Denver, I bet you could get a zoning variance and approval for one, not to mention tons of press. That said, I suspect it's a loser from an investment standpoint, because of the costs involved. But maybe I'm wrong! Maybe it's possible to do it with some combination of a trailer park business model crossed with a new construction suburban development model.

Like, have a few "spaces" for rent nightly/weekly/monthly for tinyhouses on trailers, and a few lots for sale/rent to permanent residents. You provide a few common areas/community features (Laundry area/meeting room/garden/aquaculture/greenhouse), and they pay an HOA fee for that and other stuff. You seller-finance the construction of the permanent houses (and keep one as a 'model home'), but retain the ownership of the land itself to avoid permitting headaches.

It's an out there idea, but I love it.

I think it could be a viable business model if you were going to owner finance out the homes; not as rentals.  Although we are looking at some Tiny Homes as Vacation rentals under a different model. 

Imho - at least from what I've seen and researched, the Tiny Home buyer/dweller is a much different type of buyer than your typical RV or MHP dweller.  TH folks are much more eco-conscious and interested in down-sizing, reducing costs, being environmentally-friendly and in many cases, mobility.  Unlike the 'typical' RV/MHP dweller who are strictly there b/c of costs and they can't afford to live anywhere else.  There are many great family friendly parks but way too many other parks where this is the dwelling of last resort.  

To most government officials they will only see the park as an RV park and therefore it should be developed under the same guidelines.  I'm not a big fan of jamming in as many homes into as small a space a possible but that is exactly why the business model on the RV Parks works.  Any time you have folks in that close quarters you are going to get some 'personality conflicts' among the residents.  The parks I've seen that are more successful have a spread out configuration and home owners rather than renters.  The model for renting RVs/THs is there but your expenses go way up b/c of management and maintenance on the homes.

For our business model, we will be placing two homes on a lot with a big view as vacation rentals (more of duplex than single TH).  B/c they are larger than your typical hotel rooms and we have the experience to manage them, it makes sense to build these type homes instead of the larger McMansions we typically see in beachside communities.  Further, they way these homes are built mean great savings in utilities and building costs. At least we hope so!  We'll let you know next summer!

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