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You're probably wondering are tiny homes a good investment? Should you get in on a tiny house investment? Let's look at why it may not be a wise investment.
You’ve probably heard of the tiny house movement. It’s where people build micro-sized homes on wheels to enjoy a minimalist lifestyle while having the option to pick up and move to a new location whenever they want.
The advantages cited by fans of tiny houses include living with less clutter, spending less time cleaning, a higher quality of life, and saving money on utilities and property taxes.
In theory, tiny houses sound great. But they have some major downsides that make them questionable investments. Before you go asking your financial advisor if a tiny house a good investment, here are the reasons why it really isn't.
8 Reasons Why a Tiny House is a Bad Investment
Minimalism and owning less stuff is a great way to live a simple life. But before you go out and buy a tiny house — here are some sobering facts about the tiny home movement.
1. They Cost Too Much
Surprisingly, tiny houses aren’t cheap.
It’s not unusual for builders of these homes to invest $50k on the construction of their new mobile abodes. What sense does that make?
Don’t believe me? Take a moment and do an internet search for “tiny homes for sale” and take a gander at the listings. I’ll wait.
Back already? Shocked? So was I.
I spent a few minutes checking out the listings for these places and couldn’t believe the prices I was seeing. There was even one listing for a 400 square foot tiny house with an asking price of $80k.
You’ve got to be kidding me.
2. RVs Cost Less (Much Less)
There are other housing options that make more sense than tiny houses that can be had for less – like RVs.
If you want to downsize your life and travel the country, why not just purchase a used RV? There are plenty of used RVs on the market that are much nicer than even the nicest tiny house that can be purchased for much less money.
I did a quick internet search for “used RV” and quickly found a beautiful used model with about 20k miles on the odometer and an asking price of $30k. If you want an RV you can tow with a truck, I found a larger model with a price tag of $22k.
Used RVs are much less than many are paying to build tiny houses. And keep in mind that with a tiny house you still have to own a truck to tow it from place to place.
3. You Can Purchase a House at Auction for Less
Another option is to purchase a small house at auction.
Small houses can be purchased at auction for less than the market price – and occasionally less than the average tiny house. That’s the attraction of purchasing a house at auction, to get a good deal.
Houses come up for auction all the time. There are many great websites that curate listings that make it very easy to locate them, and sometimes you can even bid online, too.
There is one thing you should be aware of if you are considering purchasing a house at auction: You typically have to have money in the bank to make the purchase. Financing is usually not available for a house purchased at auction.
4. You Can Purchase a Bank-Owned House for Less
Purchasing a house that has been repossessed by a bank is another great way to purchase a house for less than the market price.
Banks take possession of houses when owners stop making their monthly mortgage payments for a period of time. Many bank owned houses end up being sold at auction, but banks often try to sell them themselves first.
A real estate agent once told me about a guy who made an offer of $1k for a small house that needed a fair amount of TLC. “Handyman’s special” is what these places are often called.
The offer was initially refused, but a few weeks later the bank contacted the guy and asked him if he was still interested. He was. He then became a homeowner for less than many spend on a weekend vacation.
Such deals with bank-owned houses are not common, but they do happen. If you are considering building a tiny house, purchasing a bank-owned house that needs some work might make more sense.
5. You Can Purchase a Mobile Home for Less
Yet another alternative to the tiny house is to just purchase an inexpensive used mobile home.
Mobile homes have come a long way in recent years. Some of them, in fact, are quite fancy and are great real estate investments. Today’s mobile homes aren’t the crap boxes of years past.
Used mobile homes in good condition can be purchased for much less than a tiny house. In some rural areas, it’s even possible to purchase one on a small tract of land for under $50k.
6. What If You Need Some Personal Space?
A tiny house might be okay if you live alone, but what if you live with someone? What if you have a dog or cat? Is it really fair to keep an animal boxed up in a place so small it barely has room to turn around? Tiny houses are so small they may as well be cages.
Even if you do live with someone you love, everyone needs a little personal space on occasion. With a tiny house, the only way you can get some personal space is to go outside. Depending on the weather, that may not always be fun.
7. Where Are You Going to Put Your Tiny House?
Tiny houses are different from RVs. If you want to tow your tiny house around the country and see different places, you can’t just park it anywhere you’d like. Tiny house communities do exist, but they are not common.
If you are truly interested in living a nomadic lifestyle, living in an RV would be much easier. RV parks are very common, and you should not have trouble finding a place to park for a few weeks (or months) at a time.
8. Who’s Going to Buy If You Want to Sell?
The final reason why I think tiny houses are a really dumb idea involves the issue of selling.
Who’s going to buy the darned thing if you ever want to get rid of it? The market for tiny houses isn’t exactly booming.
Realistically, you may have a very hard time selling a tiny house if you ever decide the lifestyle no longer works for you. You may even have to sell at a loss just to get rid of it.
Are Tiny Homes a Good Investment?
I think the tiny house movement is a fad, and in just a few years it will be nothing more than a bad memory (hopefully) along with mullets, bell bottoms, and leisure suits.
Tiny houses just don’t have much going for them. They cost too much to build, are difficult to sell, are too small for families, and finding a place to park one is often a challenge.
Are tiny homes a good investment? At the end of the day, tiny houses just don’t make much sense.
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