Do you think tiny homes are a good investment? - #AskTheDreamTeam

Cover image via @tiffany_the_tiny_home.

Question: We don't own a home yet and want to invest our money. Do you think tiny homes are a good investment?

Answers:

Bela & Spencer | tinymigrations.com

I’ll say that our primary driver for buying a tiny house was investment. Specifically, we thought that over a three-year period of ownership, we would be able to turn a profit relative to our previous housing costs and maybe even turn a profit relative to the capital expenditure of the tiny home. If you assume the fair-market value for our home adjusted for depreciation (since we haven’t sold it), we have been able to turn a profit relative to cap-ex after owning for just two years...which is pretty exciting.

A lot went into it though...it’s a bit like asking “is getting a job a good investment?” You make a profit in some respects when you get a job, but you’re also going to make significant investments of time. What you really want to know is whether or not you’ll generate more investing your time on one job as opposed to investing your time on something else entirely.

And that’s where it’s really difficult to judge the investment quality of tiny homes. Tiny homes are very flexible assets and can be used in a lot of ways to get a return. You can live in them (which we’ve done), use them as a guest residence or long-term rental, set them up as a vacation rental on your own land, use it to rental arbitrage someone else’s available land (what our house is currently doing). Because tiny houses are so small, it’s also relatively easy to make them super sexy and well-designed...which creates other unique opportunities on the fringe (e.g. brand partnerships and sponsors).

So, for a resourceful person, in particular a resourceful person with a relatively high housing cost to displace or unused land to set up a rental, I think tiny houses can be a sound investment. But this doesn’t necessarily mean that you just buy one, set it up, and turn a profit over the long-run. It means that owning a tiny home creates lots of other opportunities, and that’s where most of the profit lies. If you’re just looking for an easy place to park some cash and wait for accruals, I strongly doubt that most tiny homes would beat an index or traditional real estate.

Lauren & Christian | adventureabode.blogspot.com

They are certainly better investments than RV’s! With a tiny home, you do not get the same dips and gains that you would get in a traditional real estate market, so in that sense it is not a great investment in terms of being able to grow your money. On the other hand, tiny homes are built to last, and won’t depreciate nearly as much as other mobile options. I would argue that a used tiny home is actually worth a bit more than a new tiny home because it takes some time to work out all of the kinks and kind of break the space in, if you will. If flexibility and downsizing are your priorities, then I do think going tiny is a solid financial option.

Nicolette & Michael | nicolettenotes.com

Tiny houses are the best thing I can think of to invest your money in. You are not only creating a home and a roof over your head, but also something that can financially add to your future. What I mean by this is even if you outgrow your tiny house or decide to move on from it, you can sell it for more than it cost or you can rent it out. Either way it will be an asset for your future. And in the meantime, you have this unique and beautiful home that you created and will add so much value to your current and future home.

Jess & Todd | tinyhouseofny.com

We may differ from the majority of folks in our outlook. We did not look at our house as an investment in the traditional sense—resale value.

Having owned a traditional home for several years and considering what we put into it in improvements, upkeep, and taxes in New York State, I cannot say we were better off when we sold than we would have been renting, so we’re coming into this with perhaps a different perspective.

We downsized from a 1700 sq. ft. home to a 200 sq. ft. home on wheels for a number of reasons, but saving money was a big one. Our ultimate goal is early retirement with the ability to travel and increase our free time with less house to maintain.

So, while we don’t see this as a traditional investment in terms of resale, it’s an investment in our present and our future because we estimate the house will have paid for itself in three years’ time since selling our previous home—we’re two years in. And because we paid for it as we built, we have no mortgage—and for this, we’re extremely grateful, and know we’re extraordinarily fortunate—and our actual cost to run the house and maintain it are extremely low (expenses are just utilities, help with property taxes, repairs, and upkeep costs). We put the money we have saved in drastically reducing our housing costs into investing in low-cost index funds—a truly sound investment, in our opinion, if you’re looking for a financial return, and travel.

We never looked at this home as something we’d profit off of in a future home sale, but we’re investing in our future by drastically cutting down on housing costs, which, for an average American is 40 percent of their budget.

Todd, known for his brevity more than I am, answered this question simply with: Some tiny housers we know say they don't travel in their tiny house on wheels, but because of their tiny house on wheels; in addition to that mindset, we can also say that we aren't investing in our tiny house, but we can invest more because of our tiny house.

Annie | pocketmanor.com

Without a doubt, building a tiny house was a great investment for me. Being in my late 20s and having spent the majority of my adult life working in non-profits, it felt for a long time like homeownership wouldn't be possible for me.

I also love where I live, but I was also wary of investing a lot of my time and energy into a space that I would have to leave behind if the right opportunity presented itself elsewhere.

Deciding to build a tiny home aligned with my desire to downsize my possessions and environmental impact, as well as my goal to create a space for myself that I could move with me in the future.

I procured a loan in order to build my house, but instead of being a 30-year mortgage, it is a consumer loan that I will have paid off in full within three years. After that, I will own my home outright!

Ultimately, maybe 5 or 10 years down the road, I would like to buy my own piece of land where I can build a small house, keep my tiny house there as an AirBnB, and maybe have room for one or two other friends to park their own tiny homes. In that situation, income from the AirBnB and land rent should more than cover the cost of my mortgage, and allow me to spend more of my time and money traveling. So, for me, my tiny house was a definite investment in my future, not just as a place for me to live, but as a potential source of income further down the road.

Sam & Tim | tiffanythetinyhome.com

We definitely think so. From a business standpoint, there's a huge market for tiny homes. For us, we just bought land and starting a build on a Deltec tiny house on Shellmate Island for AirBnb. This opens us up for some passive income on vacationers looking to try a tiny home. About 30% of travelers are looking for a unique experience when they are on vacation according to a study with booking.com We are projecting about $2,500 of extra income based on our location. After crunching numbers for months, the investment makes sense for our particular case. Times see good now and people are traveling so right now it makes sense for an Airbnb.

Scenario B would be an economic crash—well, tiny homes fit in there also. It's a great way to offer affordable housing for someone. This will help someone else get by for lower long-term rental cost and also help the tiny house owner get by with the bills even during tough economic times. It seems like a win-win in our eyes.

We think the same can be applied in living in a tiny home. After a small amount of time, you’re able to pay your home off. From there you’re able to pocket any money that would normally go towards a mortgage. For us, we will pay off our home in the next 1.5-2 years. After that, it's an extra $12k a year we have to invest back into our life and help further grow whatever we choose.

There is so much versatility with tiny homes and we believe it's a good investment overall.

Marnie & Dan | tinyhaus.com.au

We built our foundation Tiny Haus at the rear of our block of our existing home. We did this so that we had a second residence and we are able to rent out the existing home. The rent we receive for the existing house goes towards our mortgage repayments. We are located in Sydney, Australia and property prices are very expensive and we would not have been able to afford to buy a second investment property where we are. Building a secondary dwelling has immediately created a positively geared investment, which would not have been possible had we bought somewhere else.

We have intentions of placing our Tiny Haus on AirBnB whilst we travel, so it will be available some weekends and school holidays, etc. With the purpose that we are hoping to fund our travels with this income.

If at any time we decide to move out of our Tiny Haus and back into the larger home on the block, we could rent out our Tiny Haus for a second income. Or if we decided to sell, a potential buyer would see these benefits also and we feel this could only be a positive.

We spent many months going over the figures to ensure that it would work financially and for us our Tiny Haus is a good, affordable investment.

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