HGTV popularized the tiny house movement through shows like Tiny House, Big Living, but in the long run, does the tiny house trend meet or match its expectations? Dubbed as environmentally friendly, economical, and minimalistic, many are buying into the ideologies of what living on—and in— less represents. But, for an investor looking to make a dollar, it might not return a profit as cute as what it looks like it could from the outside. Let’s take a peek into what the tiny house trend is all about and why you may want to stick to standard residential properties as your go-to investment strategy.
Dollars, dollars, dollars.
If you think that a tiny house = a tiny cost, think again. These miniature residences can surprisingly run upwards of hundreds of thousands of dollars! Granted, it’s possible to find a tiny home in the $10k range, but keep in mind financing. It’s a cool idea to design a doll-house size home from the ground up, but it can be a big struggle to come up with even the 3 percent down required on a regular FHA home loan.
Tiny homes are for people with big wallets and for most Americans, they are in such unfortunate financial straits that seven in every ten have less than $1,000 in savings. I think we can agree that tiny homes are a cute idea, but if you want a tiny house, it might better to consider it a hobby project as opposed to an investment asset.
Where is ‘home?’
If you solve the dilemma of financing, you will then have to determine where your tiny home can be at ‘home.’ Due to zoning and building restrictions, tiny homes cannot be placed ‘just anywhere.’ If you pass the rules and regulations of city zoning, you might want to consider what your neighbors think. People may think that your smaller, “cheaper” home will bring down the value of their regular sized residences.
Niche might not be so nice
Although you may be in love with your tiny home now, it’s always a good idea to consider the probability of one-day selling; whether this is a single family home, condo, or tiny home. Those interested in the tiny home movement is a niche group, which means a smaller pool of buyers (and I mean SMALL)— not the best news for someone who likes to make money from buying and selling properties. When there is a bigger pool of interested buyers, this helps to drive prices up. This helps your pocket book, Investor.
Single family homes typically have the most market appeal, so many experienced investors have been known to stick to those investments instead of following current trends. Tiny homes do make slightly more sense than McMansions, though. In some circumstances, tiny homes can even be needed. In communities where there are housing shortages or limited land, it would make sense to prop up a small residence, but long-term, will that tiny home make sense?
Tastes change over time
Many scenarios of those in love with the idea of the tiny home have learned through experience that everyday life isn’t as charming in tiny world as it once appeared. The process became more expensive, too isolating, or simply difficult due to the limited space or location of the tiny home. When in tiny home living, there is simply no room for expansion.
The young professional who desired to have a simple life, may soon have a family and want a few more square feet for baby. Those who only wanted a small space to lay their heads eventually may desire more square footage for entertaining. It’s also a good idea to ask if tiny homes will always be green, sustainable, or appealing.
At this point, it’s hard to know the outcome of the tiny home trend; especially when two or three decades from now, tastes, interests, and needs will have changed. It’s a marketer’s bread-and-butter to sell you the fairytale of a tiny house. “Have less debt. Take care of the planet. Live simply. Enjoy life.” Grand statements, but just know living and loving the tiny life is not always what it’s cracked up to be.
The future of the tiny home
In the future, there always could be the possibility that tiny homes will become vacant— lying dormant and unoccupied. So much for green sustainability! There are already a plethora of homes in America, so building more homes, even if they are tiny, doesn’t necessarily mean “environmentally friendly.” There are many properties to choose from that can be remodeled. Fixing up an existing building has the potential to leave a smaller carbon footprint, and in some cases, be more efficient. Since single family properties have more access to financing than tiny homes, therefore a greater degree of people have a chance to benefit from their existence.
Tiny homes have their niche, but it’s not one that I (personally) would first look into for investment purposes. Be aware of getting caught up in ‘at-the-moment’ trends.
I have to admit, the creativity behind tiny homes is awesome, and the marketing behind it ingenious! But, don’t let that distract you from your profit margin. Invest money where you see the best potential for long-term growth, sustainability, and profits.