Advertiser Disclosure

advertising disclaimer
Skip to main content
tinyHouse.jpg

Is a Tiny House Right for You?


[Updated: Jun 10, 2020 ] Jan 19, 2020 by Aly J. Yale
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

With home prices rising, an ongoing shortage of inventory, and the increasing interest in minimalist living (thanks, Marie Kondo), tiny homes are getting more and more notice.

In fact, according to a survey from the National Association of Home Builders, more than half of Americans would actually consider living in one.

But tiny homes aren't just residences. In the right locations, they can be solid investments, too, making for profitable short-term rentals, vacation properties, and even long-term tenants.

Should you get in on the tiny house game? Let's look at the pros and cons.

Pros of buying a tiny house

By far, the biggest benefit of a tiny home is the cost. According to an analysis from Tiny Society, the average tiny home runs just over $46,000 -- a far cry from the nation's median home price of $310,000 (as of Q3 2019). If you're willing to DIY it and really put in some elbow grease, you could even scale back your price to just $15,000, according to Realtor.com.

But the low cost isn't the only perk you'll get with a tiny house. You can also enjoy:

  • Little maintenance and upkeep
  • Potential location flexibility (as long as your home has wheels or you have a truck that can tow it)
  • Extra income stream if you're willing to rent it out
  • Lower utilities and operating expenses
  • A smaller environmental impact
  • A simpler way of life

Tiny homes are shown to appreciate over time, too -- and at double the rate of much larger properties. According to an analysis from Realtor.com, homes under 1,200 square feet typically see their value increase over 7% annually. Homes over 2,400? They only appreciate 3.8% each year.

Cons of buying a tiny house

As with anything, tiny homes aren't without their drawbacks. Though the cost-savings and simplicity of a tiny house might seem tempting, there are some serious disadvantages to buying a tiny home -- as well as trying to live in one.

For one, finding a place to build or place your home can often be a struggle. Zoning laws typically have minimum square footage requirements, and you also need to make sure you have sewage, water, power, and other utility hookups as well. Both can be challenging if you live in a very urban area.

Here are some other drawbacks you'll want to take into account:

  • The lack of space: Tiny homes limit you, both living- and storage-wise. What will you do with all your stuff? How will you stay organized?
  • Financing troubles: If you don't have the cash to buy or build your home outright, you might have trouble financing it. Most tiny houses don't cost enough to qualify for a mortgage, and the number of tiny home loans out there is limited. You might need to use an RV or personal loan to make it happen.
  • The fleeting factor: Tiny home living/renting is a trend today, but will it still be a few years down the road? If it dies off, what will you do with the property then?

You also need to think about the close quarters you'd be living in. If you have a spouse, kids, pets, or roommates, you could face some personal struggles when sharing such a small space.

Make sure you have a plan for how to handle conflicts, as well as who will take on the major responsibilities and chores around the property. With so little square footage, you'll need to be extra on top of your housekeeping and organizing if you want to live comfortably.

Still not sure?

If you're still not sure whether buying a tiny home is the right move for your life (or your investment portfolio), then why not try before you buy? Airbnb, VRBO, and Glamping Hub have tiny home listings across the country, and there are also tiny home-specific vacation rental companies like Getaway you can consider.

Book a night or two and see how the experience goes. Is it something you'd want to do again? Could you see yourself doing it for years or even decades? A short trial is also a smart idea if you're thinking of investing, as it can give you ideas for how to design, build, and organize the home and even how to organize your property once you buy it.

Got $1,000? The 10 Top Investments We’d Make Right Now

Our team of analysts agrees. These 10 real estate plays are the best ways to invest in real estate right now. By signing up to be a member of Real Estate Winners, you’ll get access to our 10 best ideas and new investment ideas every month.

Find out how you can get started with Real Estate Winners by clicking here.

The Motley Fool has a disclosure policy.