Tiny Houses: A Good Idea Or A Terrible Investment?

Tiny Houses: A Good Idea Or A Terrible Investment?

All About Tiny Houses is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

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Are tiny homes a good dwelling option? Or are they a terrible investment you must avoid?

The tiny house movement has inspired many to downsize and focus on what’s more important: conserving energy, creating better communities, and saving the environment. However, the question remains: are tiny houses really a good idea or a terrible investment?

Experts and people, in general, have varied opinions. Some say tiny houses offer a lot of benefits, and others beg to differ. Banks and insurance companies believe that tiny houses are a terrible investment. 

While we can’t deny that tiny houses have downsides, there are many other reasons why we firmly believe that they are a good idea. Read further as we discuss why tiny houses aren’t that bad as others make it sound. We’ll also talk about why many say they are not a good investment.

The Pros and Cons of Tiny Homes

To determine whether you should invest in tiny homes or not, we have to understand what makes them good and bad. 

Why is it important to know if tiny homes are a great housing option? Understanding the advantages and pitfalls of tiny homes will help you make an educated choice for you and your family. By knowing the downsides of the tiny house movement, you can better weigh your options. 

Many people believe that renting is a better choice rather than investing in a conventional home. While it’s no doubt that renting is an affordable alternative if you cannot afford up-front costs, we can’t just ignore the fact that living in a rented dwelling is actually living on a temporary basis. 

Renting a home doesn’t offer stability. The monthly payments you shell out also don’t provide long-term security, nor do they grow your savings. 

That being said, people nowadays look for an excellent housing option that doesn’t hurt the bank. 

Thanks to tiny house TV shows and documentaries, more and more people learn about how the tiny house movement can help one to get his own comfortable and sustainable dwelling place without spending an arm and a leg. 

Are tiny homes a good idea financially and environmentally? Let’s find out. 

Tiny Houses: A Good Idea?

We’ve listed several reasons why we believe tiny houses are a great option. 

#1 You can take it with you

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Living in a tiny house on wheels gives you the freedom to travel almost everywhere you want.

Living in a tiny house on wheels (THOWs) gives you the freedom to travel almost everywhere you want. And what’s great about it is that you’ll never have to leave your home. You can bring your tiny home wherever you want to go. 

The number of people addicted to traveling has insanely increased over the years. Take these statistics as proofs:

  • According to Phocuswright, 36% of travelers rated travel as an important spending priority. 
  • Travel Agent Central reported that Americans spent $101.1 billion on summer vacations.
  • As per Allianz Travel Insurance, millennials (aged 18 to 34) spent, on average, $1,373 on summer vacations. 
  • US Travel Association reported that leisure travel accounted for $718.4 billion in spending in 2017, while business travel accounted for $317.2 billion. 

These numbers and reports tell us one thing: people love to travel more than ever. So, imagine traveling from one place to another without having to leave your home? Wouldn’t it be nice to explore new places without spending big on hotels? 

There are over 10,000 tiny homes in Northern America, and 700 tiny homes are being built every year. We can conclude that one of the reasons for this surge is that people like the idea of having a dwelling place they can bring everywhere. 

Vacationing is a bit different when you have a tiny house on wheels. There’s no need to pack a suitcase because you basically bring everything with you. 

Traveling is not just for leisure. Others travel because that’s what they do for a living. A tiny house on wheels is a great idea for those who travel a lot as part of their job. 

Tiny homes are built in different ways. Most of them are equipped with a solar panel system and has a rainwater collection, which makes them absolutely perfect for off-grid settings. And because tiny houses are sustainable, you can park them anywhere you want. 

Of course, traveling with your tiny house is only possible if it is built on a trailer. There are, however, some drawbacks with a tiny house on wheels, which we will talk in-depth later on this post. 

The bottom line: mobility is one of the things that make tiny houses a great idea. 

#2 They require less money to build

In a study conducted by Harvard University, almost 40 million Americans live in housing they cannot afford. Rental prices continue to increase, and homeownership has dropped, meaning that millions of residents pay more than they reasonably should.

The prices of homes in the market go up, making homeownership a difficult feat. And while the prices hike up, the wages haven’t kept pace. 

That said, many people are stuck at renting. Harvard reported

“The surge in rental demand that began in 2005 is broad-based — including several types of households that traditionally prefer homeownership.”

For some people, they believe that renting is more affordable than actually getting a house built. But the truth is, “rent gains… continue to far outpace inflation.” 

Harvard reports: “the number of modestly priced units available for under $800 declined by 261,000 between 2005 and 2015, while the number renting for $2,000 or more jumped by 1.5 million.”

Again, renting price continues to elevate, while wages remain the same. 

So, why not build a traditional home instead? It’s harder than it sounds, actually. According to Home Advisor, building a new house comes at $298,660, which would mean a 2,000-square-foot home costs about $150 per square foot. 

Let’s not forget that there are lots of variables to consider, such as the location. On average, the cost of constructing a new home is between $150,000 and $450,000. 

Clearly, renting is not for everyone — so is building a new home. People search for other alternatives, and tiny house living is one of the best options. 

In an article from The Spruce, the average cost of a DIY tiny house is approximately $23,000. But you can build one for a lot less than that. Some tiny homes were built for no more than $12,000. Some even go as cheap as $500. 

Many choose to construct a tiny house because it costs a hundred-thousand-dollar cheaper than traditional homes. What’s more, if the tiny house is on wheels, there is no need to purchase a property, which is usually pricey. 

#3 With a tiny home, you can go extremely environmentally-friendly

A tiny home is basically small, which means you will be using fewer materials to build it. And with the limited space, it comes with a notion that you cannot put as many household items as you would in a spacious traditional home. 

However, tt’s not a guarantee, that small dwelling space always means fewer appliances. But most often than not, tiny house dwellers choose to have minimal household items to save space. Fewer appliances mean more space and less carbon footprint.

In building a tiny house, you can use recycled, salvaged, and repurposed materials. Some tiny homes can be built even without the need for tools. You can assemble DIY homes even without professional experience. 

Compared to traditional houses, you can cool or heat a tiny home efficiently and quickly, meaning you’ll use less energy to get the right temperature for your home. Depending on your location, you may not need a cooling or heating system. Sometimes, opening the windows can already give your home the right level of coziness. 

For environmentalists and conservationists, a tiny house is, indeed, a great idea. For those who want to go off-grid, a tiny home is an absolute good choice as they can rely solely on solar panels and rainwater. 

Off-grid tiny houses do not need to hook up to electric grids and water and sewer systems. When your petite dwelling relies on solar power and water tanks, you don’t have to worry about spending big on your utility bills. 

On top of saving big on utility bills, you don’t have to worry about mortgages, too. Think about all the trips you can make with the money you will be saving!

But it goes without saying that off-grid tiny homes have a lot of setbacks — more of that later. 

#4 Tiny houses let you declutter

Did you know? We only use 20% of our clothes 80% of the time. This leads us to the question: do we really need many clothes if we don’t wear them often?

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By necessity, you will have to sell, give away, or disregard the things you don’t need.

Here are more mind-blowing facts about clutter:

  • The average American household has 300,000 things. Obviously, no one uses that many items every day, but people usually cling to items that mean something to them. 
  • The average American spends a year of his life searching for lost/misplaced items. In houses full of clutter, finding missing items can be disastrous. In fact, Americans spend an average of six minutes looking for their keys each morning. 
  • Papers, documents, files, folders, cards, and letters don’t take up much space, but collectively, they are major contributors to household clutter. According to Agency Sales Magazine, 8 out of 10 papers in the house don’t even get a glance. 

Imagine a life without clutter… your home is mess-free and contains only the items that serve a true purpose. A home without clutter can actually improve your health — physically and mentally. 

A neat and organized room can also help you focus more, which will enhance your productivity. And when everything is within reach, you can do your chores a lot easier than if there are clutters. For example, cooking, cleaning, and other chores come in handy. 

Having fewer gadgets and appliances lets you have direct access to things that are tried and true. If your kitchen is decluttered, cooking is simpler and more time-saving. 

A clutter-free home has a domino effect on maintenance. And not just that, a decluttered home can free up your mind, which then results in feeling less anxious. It also helps you to be more peaceful, confident, and have stronger decision-making skills. 

Living in a tiny house doesn’t necessarily mean you’ll naturally be able to remove clutters. However, because of the limited living space, there is a notion that you will have to let go of the items that you don’t really need, leaving only the things that serve a true purpose. 

When you live in a traditional home for several years, it’s easy to overlook the stuff you have. And before you even know it, your things just pile up everywhere. Logically, you cannot stuff everything that fits into a 2,000-square-foot-home into a 200-square-foot dwelling. So, by necessity, you will have to donate or sell most of your things. 

This gives you the chance to take a deep look at your possessions and determine what honestly matters to you. Sometimes, we tend to keep things even when we don’t necessarily need them just because they have been there. And most of the time, we buy things only because they look cool.

Once you have narrowed and sorted your possessions, you will end up with the only meaningful and really necessary things. Plus, you’ll have more room for other important items in your tiny dwelling. 

Have you heard about Henry David Thoreau? He is a popular American essayist and a well-known transcendentalist. He is one of the founders of the tiny house movement. In 1845, he published a book entitled Walden. It talks about the life he had when he lived in a cabin for two years and two months. 

His principle was “to live deliberately” with the things that are truly essential in life. In his cabin, he only had a desk, chair, bed, and fireplace. His goal was to become “one with nature.”

To learn more about Henry David Thoreau and the history of tiny homes, read When Did Tiny Homes Start? A Tiny History. 

As a recap, we’ve learned that a tiny house is a good idea because:

  • You can take it with you
  • It requires less money to build
  • You can go extremely environmentally-friendly with it, and
  • It lets you declutter.

Now, let’s talk about why many believe that tiny houses are a bad investment.

Tiny Houses: A Terrible Investment?

While there are a lot of people who like the idea of living in tiny houses, there are those who believe that tiny house living is a terrible investment. 

Tiny house shows and documentaries have shown us that the tiny house movement can help in paying debts and saving money. It is also the best option to go for those who want to live a financially and environmentally sustainable lifestyle. 

However, what looks good on TV can be much less appealing in real life. Living in a tiny house has several setbacks. 

#1 Tiny houses are actually expensive

Just because tiny houses are technically small doesn’t always mean they are cheaper to build. In fact, the typical tiny house costs more per square foot than traditional houses do — relatively because larger construction projects make for more efficient use of resources. 

According to HomeAdvisor, an average 2,000-square-foot home costs approximately $150 per square foot to build. On the other hand, Tumbleweed Tiny House Company — one of the leading tiny house builders in America, typically price tiny homes over $300 per square foot. 

But worry not, we’ve listed affordable DIY tiny houses in this article: The 11 Best Tiny Home Kits That Won’t Break The Bank

#2 Tiny houses might be a home, but they’re technically not a house

Many tiny homes are built on a trailer, which makes them recreational vehicles. In fact, Tumbleweed Tiny House Company calls most of its products “tiny house RVs.” They follow the standards set by the Recreational Vehicle Industry Association in building tiny homes. 

The company defines tiny homes on wheels as licensed RVs, not houses. This leads us to the next reason why many believe that tiny houses are a bad idea:

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#3 Tiny houses are a terrible investment

Tiny homes are cute and adorable. They offer minimalist lifestyle — which isn’t just a fad, but a kind of living that actually offers a lot of scientifically-backed benefits. And like what was discussed at the beginning of this article, tiny homes, having built on wheels, offer mobility and the freedom to move from one place to another without ever leaving your home. 

However, financially speaking, tiny homes are a bad investment. Why so? Because they are technically recognized as RVs and not as traditional houses, they depreciate at the same rate as vehicles and RVs. 

There are many reasons why they lose value. 

  • Tiny houses on wheels are more prone to damages. Unlike in large houses, small damages in tiny houses may look so much bigger. Also, tiny homes are not intended to withstand harsh weather. Road debris may also cause damage to tiny houses on wheels. 
  • Banks see tiny houses not as residential homes but as RVs, or, in other words, vehicle. And vehicles, as mentioned earlier, depreciate fast. Banks don’t invest in things that they know won’t outlast them. They only put their money on things they know that will surely pay off, and unfortunately for them, tiny homes are not worth it. 
  • Insurance companies also have a strong objection against tiny homes. Tiny houses are more vulnerable to damages, especially if they are frequently hitting the road. And when your tiny home gets damaged or destroyed, insurance companies will have to pay you… something they’re really not a fan of doing. 

Also, for insurance companies, tiny homes on wheels are far worse than cars. Cars are also relatively fragile, but you don’t actually live in them. 

A tiny house could only hold or appreciate only if it happens to be unique that there is a high demand for it — like collectible cars. And while this is not impossible, it is very unlikely to happen. 

On top of that, the tiny house should also be in peak condition over a long period so it can hold value — something that’s difficult to guarantee since you will be living in it and damages are insanely inevitable. 

#4 Tiny homes need to follow stringent rules

Many people like tiny homes because they offer mobility, require fewer materials to build, and can be built without the need of buying a land property. But these things aren’t really that great if you think deeply about it. 

Yes, you can transport a tiny home from point A to B, but certain states don’t allow tiny house and RV owners to park anywhere they want. In fact, there are only a few places where the law lets you park a tiny one. The reason is because of the combined size of the towing vehicle and the trailer. 

Much like cars, tiny homes on wheels have their designated parking spots. Often so, RV parks allow tiny houses on wheels to settle on their grounds because their sizes are closely similar to RVs. 

Note that there are different types of parking: short-term, long-term, and permanent. Parking in a prohibited spot may result in a $10 fine or more. In some states, living in a tiny house permanently is illegal — most often than not, it is not because of a specific law, but rather the rules aren’t that clear about tiny houses. 

So while a tiny house does offer mobility, at the end of the day, you still have to stress about where you can park your mobile home. 

[Must read: Exactly Where Can You Park A Tiny Home Legally?]

Another thing about tiny homes that might hold you back from getting one is that they have to follow specific building codes, some of which are too stringent. Depending on which state you plan to build your petite home, you must follow a certain set of standards to avoid getting fees or penalties. 

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For example, in Spur, Texas, they only allow tiny houses that are built on a foundation. It also has to have at least six inches of cement footing with steel reinforced for load-bearing walls. 

In Georgia, you must comply with the standards set by the local state. The minimum area of a tiny house must be not less than 70 square feet, and the dimensions of the rooms must not be less than 7 feet (horizontal dimension). 

Most states require that a tiny home gets inspected to ensure it has complied with all the codes and regulations before it gets approved. 

To summarize, tiny homes could be a bad investment because:

  • While they require fewer building materials, the total cost of building or buying tiny homes is actually expensive.
  • A tiny home can be a home, but not a house.
  • They depreciate just as fast as vehicles do.
  • There are many building codes and jurisdictions that must be complied. 

Final Thoughts

So, are tiny houses a good idea or a terrible investment? You’ll be the judge. One thing’s for sure: tiny homes offer a lot of benefits, but like anything else, they have setbacks that could hold you back from owning one. 

Others move into tiny homes not by choice, but because it’s only what they can truly afford. Some people downsize to experience a mortgage- and debt-free living. And many transition into tiny homes to build a better environment and community. 

Whatever your reason is for considering tiny homes, you must weigh the good things and the bad things about them. By understanding the upsides and downsides of tiny house living, you’d be able to make an educated choice that could benefit you and your family. 

Related Questions

Do you pay property taxes on a tiny house?

Yes, but it won’t be as enormous as with traditional homeownership. You’ll likely pay an annual personal property tax on your tiny home as a trailer or an RV. 

Will banks finance a tiny house?

Banks can finance a tiny house, but most choose not to. Several reasons drive banks not to shell out money on a tiny house: tiny houses depreciate as fast as vehicles, for example. 

All About Tiny Houses is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

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