Love the idea of living in a tiny house? You and the rest of the world! But before you purge all of your belongings and sell your regular-size place, you’d better get a bit more acquainted with what’s involved with buying an itty-bitty abode. Let’s take a look.
What is a tiny house?
The typical home in America is 2,600 square feet. In order to be officially considered “tiny,” a house has to be 400 square feet or less (excluding lofts), according to the International Code Council.
Important to note: Some tiny homes are set onto foundations, just like traditional houses, while others are on wheels and can be moved anywhere you have the space to move them.
How much does a tiny house cost?
Tiny homes typically don’t cost as much as a regular ones, but that doesn’t mean they’re cheap: If you hire a builder to erect one from scratch, you should be prepared to shell out as much as $125,000, “depending on the size of the home, customization options, and off-the-grid options like water tanks, solar panels, and generators,” says Brian Hawkins, founder and CEO of Tiny House Movement.
If you want to reduce costs, you can try building your tiny house yourself (or at least parts of it), which can bring costs down to below $50,000.
How do you finance a tiny house?
“If the home is on a foundation, you can use a traditional lender just like any other home,” Hawkins explains. But securing financing for a tiny home isn’t as straightforward as some buyers might expect.
While traditional lenders are willing to loan hundreds of thousands for a sizable home, they’re often reluctant to lend to tiny-home buyers. The problem is the appraisal: Unless you live in an area with an abundance of tiny homes, there aren’t usually enough comparable properties nearby for the appraiser to determine the house’s value. No appraisal, no loan.
If you’re committed to tiny-home living and curious about financing alternatives, you have a few options:
- A personal loan: Tiny homes on wheels are considered personal property, which may relegate you to a personal unsecured loan (a regular home mortgage, on the other hand, is a secured loan where you provide your house as collateral if you default on paying it back). The downside with personal loans is it is likely to have higher rates and shorter terms.
- An RV loan: Some forward-thinking lenders like LightStream (a division of SunTrust) are designing their RV loans to be easy for tiny-house buyers to get. Certain tiny-house builders (e.g., Tumbleweed) build their homes to meet all of the criteria for an RV loan and have a financing option built into their buying process.
- Crowdfunding: Because the tiny-house trend has attracted so much attention, there are networks of people willing to pool their money to invest in financing for them, according to Ethan Waldman of TheTinyHouse.net. Here’s more on how to finance a tiny house.
Where can you put a tiny house?
Tiny homes are in a gray area when it comes to zoning, according to Shawn Breyer, owner of Breyer Home Buyers, in Suwanee, GA.
To start, you’ll need to start by calling your planning or zoning department to ask about local ordinances: Are there any restrictions on areas where you’re thinking of building? How are tiny homes zoned, and where are tiny homes allowed?
Some areas are more tiny-home-friendly than others. Certain communities (e.g., Philadelphia and Florida’s Sarasota County) have no size restrictions for tiny houses as long as they meet building codes for safety. Other jurisdictions (e.g., Colorado’s El Paso County) have adopted new legislation to allow tiny homes wherever mobile homes are allowed.
Here’s more on where to build a tiny house.
Tiny house vs. ADU: What’s the difference?
Certain cities allow tiny houses to be built as accessory dwelling units, or ADUs, which means they can be put on a property that already has a larger residential home. Many cities and counties limit ADUs to 1,200 square feet or less.
“Your zoning department can give you the lowdown, but the path of least resistance will be a neighborhood zoned for ADUs or mother-in-law apartments,” says Breyer.
To find out more info for a particular area, check the national, state, and local regulations compiled by the American Tiny House Association.
Are tiny houses a good investment?
Tiny homes on wheels hold their value very well, says Hawkins, but if you want to be more assured of eventually coming out ahead, you need one with a foundation.
“Those with a foundation are appreciating quicker than the mobile variety right now,” says Hawkins. (Just like a regular residential home, the “real” value lies in the property it sits on.)
Are tiny houses hard to sell?
Not hard, exactly, but you’ll need to be patient.
“Tiny homes are a novelty and are highly niched inventory,” says Breyer.
The handful he’s sold took 37 days longer to move, on average, than normal-size, single-family homes.
Is a tiny house right for you?
There’s plenty of appeal in the idea of tiny-home living, especially for younger couples or empty nesters ready to downsize. But that limited square footage can get tight quickly.
Hawkins says three years is about the average amount of time tiny-home dwellers he knows have chosen to stay in their house. But while they might upgrade to a microhome—say, 600 square feet—they typically don’t move back to a traditionally sized residence.
“I don’t [know] anyone who’s gone back to a regular-sized home after taking the leap to live tiny,” Hawkins says.
Wondering if there are tiny homes for sale in your area? Check out realtor.com’s listings.
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