9 Hidden Dangers of Owning a Tiny Home
Love the idea of a tiny house? Here's what you need to know about the subtle and sometimes hidden costs in these exercises in lilliputian living.
They’re Not All That New as a Concept
The tiny-house movement isn’t exactly new. Since the dawn of time, those in search of tranquility have long sought to carve out small spaces for themselves. Now we’re seeing the resurgence of simplicity with a shift toward minimizing and downsizing.
A tiny house is generally one that’s less than 400 square feet, says Chris Dorsey, founder of Dorsey Pictures, the producer of Tiny House, Big Living. They’re generally built on trailers for mobility, but they can be built on foundations.
“What attracts most people to tiny homes is that they are redefining the American dream by owning a home with little to no debt while traveling the country and even working on the road,” explains Dorsey. “With a tiny home, people can design their own space that fits their personal interests and tastes at a much lower cost than a standard custom home… and because everything is smaller in a tiny home, you can pick from top-of-the-line finishes at more affordable prices.”
But beware. Dorsey warns that construction costs may include subtle or even hidden expenses that add up fast. Here’s what you need to know. Here’s a look at 12 things to consider before building a tiny home.
They Can Cost From $10,000 to $180,000
“What’s cool about tiny houses is that they can be built to match anyone’s lifestyle and budget,” says Dorsey. Building costs can range from $10,000 to $180,000, but the average falls between $30,000 to $40,000. “Some people are shocked at how much tiny homes cost while others can’t believe how inexpensive they are,” Dorsey explains.
How much it will cost to build your lilliputian living quarters will depend on various factors. Among them: What locale you’ve chosen, whether you build on a foundation or on a trailer (figure $25,000 for the former and $35,000 for the latter), the complexity of the building plans, how much you plan to do yourself, and the materials used.
“You should budget at least $65,000,” says Ryan Fitzgerald, owner of Raleigh Realty. “You might be spending $25,000 on building materials alone.” Watch out for these surprising costs that come along with buying a home for the first time.
DIYing Isn’t Always a Great Idea
“I’ve seen several people take off work for a month or two to build their own tiny homes and think they are saving money by doing so,” says Rachel Preston Prinz, who runs an architectural firm, “Then, months later, they’re still out of work and building.” So anyone who wants to go DIY should be aware of the money they won’t be making while they’re saving money on contractors.
Don’t Expect To Benefit From “Economies of Scale”
“The smaller the home, the higher the contractors mark up their prices,” says Gabe Lumby, who along with his wife is building a “tiny-ish” house on his parents’ land. Contractors aren’t excited to make less money because the home you’re building is smaller. “So we’ve found that the markup is higher, or they’re simply not willing to take the job,” he says.
Zoning Laws Can Add $$
Every municipality has different zoning, building, land use and inspection laws, not to mention the associated fees, says Prinz, “Whatever you do, play by the jurisdiction’s rules,” she urges. “Rural areas usually have more lenient laws, so choosing rural areas may save you money. But what you save here might get eaten up on connecting to the utilities’ grid.”
Try out these clever storage hacks if you live in a tiny home.
Don’t Forget About Homeowners Insurance
There are challenges associated with obtaining homeowners insurance for these petite palaces, says Mike Schmidt, business development director for the Tiny Home Industry Association. “Tiny homes are absolutely insurable,” he says. “It just depends on who built it, like a professional builder or yourself as a DIY project, and how it’s built — whether or not it’s on a trailer or placed on a fixed foundation.”
Getting your home certified by the National Organization for Alternative Housing (NOAH) may make it easier to purchase coverage from some insurers, he advises, but only when the house is built on a foundation. For mobile tiny-homes, “make sure it’s got RV certification, and try to use a builder who’s RV certified,” says Laura Fuduli, contributor for Answer Financial, a national auto and home insurance agency.
Peter Foley, Senior Vice President of Operations for Answer Financial, adds this advice: “It’s important to let your insurance agent know all the details on your tiny home, like how it was constructed, how much it weighs and how you plan to use it.”
Don’t Even Bother Trying To Get a Mortgage
“Tiny homes often do not qualify for mortgages due to their mobility and small footprint,” says Todd Nelson, business development officer at LightStream, the national consumer online lending division of SunTrust Bank.
While some homeowners complete their adorable abodes using all cash, others — particularly those with good credit scores — obtain unsecured personal loans through companies like LikeStream, which offers loans from $5,000 to $100,000 and can be completed in mere minutes online. Check out these tiny homes for sale that you can buy right now.
Don’t Forget To Consider Resale Value
“Don’t expect your tiny home to appreciate like a traditional dwelling,” advises Fuduli. Many people will “customize their tiny houses for their lifestyle,” which makes it perfect for them, but doesn’t necessarily make it easier to resell.
But as with all home sales, the value may ultimately come down to “location, location, location,” according to Fitzgerald. “If you purchased a tiny home in a highly desirable and dense area, then your tiny home should appreciate in the same way the market does. Your land is going to have a much larger net of the total appreciation since the structure is small. However, it should appreciate right in line with the local market.”
Fuduli agrees that any home permanently affixed to a foundation will have better resale value. “If your tiny home is on wheels, try to think of it like an RV, which can depreciate like a car,” she says. Plus, check out the coolest homes in each state.
Among Americans involved in choosing their current home, the top regret for one-third of them is “not buying a larger home,” according to a spokesperson for realtor website Trulia.com. So be careful what you wish for and what you decide to build. It might be a good idea to try before you buy. Here are some rental opportunities to get you started:
- Mt. Hood Tiny House Village in Welches, Ore. (about 45 minutes outside Portland);
- Leavenworth Tiny House Village in Leavenworth, Wa. (about two hours outside Seattle);
- Tuxbury Tiny House Village in South Hampton, N.H. (about one hour north of Boston).
The fact that some small-space buyers are experiencing buyer’s remorse could also mean the tiny house trend is on the wane, which could negatively impact resale value. Trulia’s rental roundup with listings from Texas, Florida, Louisiana and California may provide some insight on how the resale market is holding up these days.