Lauren Nowacki6-minute read
UPDATED: May 23, 2023
Homeownership is a big accomplishment, but it can come with more debt to pay off, more commitment to stay in one spot and more investment to update your home for environmental needs. So how can you enjoy the perks of homeownership without the sacrifices that come with buying and maintaining a traditional home?
Enter the tiny house movement: a cultural effort to support downsizing and living a simpler lifestyle with smaller accommodations and increased financial freedom. Tiny house living can be a way to reduce debt and allow you to save money or spend it on other things like travel, education or unique experiences.
If these ideals are important to you, read on to learn more about tiny homes, the average – and sometimes hidden – costs to build these smaller homes, and whether they’re right for your life goals.
A structure less than 400 square feet is considered a tiny house. While much smaller than a typical home, a tiny house provides most of the comforts of larger homes, including a full- or queen-sized bed, a bathroom, a kitchen and a living room – but on a much smaller scale.
The average cost of a tiny house is $30,000 – $60,000, but a tiny house can cost as little as $4,000 or as much as $180,000. One of the appealing things about building a tiny house is that you can decide how many extra features you want to include. The cost of these small custom homes is highly dependent on building materials, the amenities you choose and additional costs.
For example, a $10,000 house will likely be lacking basic necessities like a bathroom, which is often required by local building codes. Tiny homes that are priced higher – usually over $50,000 – typically include more luxuries, like granite countertops, stainless steel appliances and other high-end finishes.
Even still, the cost of building a regular-sized house is just over $280,000. So, with a tiny house, you may be able to get the bells and whistles in a home for less money. However, it comes at the cost of less space.
With prices lower than a normal-sized home, tiny house owners may think they’re getting quite the bargain. But you’ll need to consider hidden costs and other factors before you downsize for a deal.
While many people decide to build their own tiny house, the cost of land and building materials can add up quickly. Demand for building materials has increased over the years and resulted in a 5% to 10% rise in prices. Some of these materials can be difficult to get your hands on so it’s important to start planning early and account for extra time for delivery.
You’ll want to consider the costs of human error, too. If you are not a skilled builder, even one mistake could cost you extra time and money. It might be worthwhile to hire a tiny-home builder who has expertise in building efficient dwelling units.
Depending on where you live, you’ll have to follow the local zoning laws. These laws prevent homeowners from putting their tiny house wherever they want without paying for it. For example, tiny houses cannot be placed on a friend or family member’s land for free.
It’s a good idea to work with a property surveyor to understand the boundaries for your particular location. This can cost around $100 – $600. Some urban and suburban communities have strict regulations so it’s important to contact your local government officials to understand the zoning laws to avoid any zoning issues and fines.
Several tiny house communities have organized in pockets of the country without zoning restrictions. Often, these micro communities will offer communal spaces like firepits, fitness centers or outdoor picnic tables to accommodate eco-conscious mindsets.
You will most likely need a building permit to construct your new home according to local building codes, as well as to legally occupy your tiny home. Before you build, you should refer to Appendix Q, a uniform set of standards for constructing mini homes.
However, some codes haven’t been modified for tiny houses, so you may need to consider the cost of hiring a contractor or tiny house builder who is familiar with the appropriate codes.
At the very least, you may need to hire an electrician to ensure that electrical components are safely installed so that they don’t pose a fire hazard or electrocution risk. This also applies if you’re converting an existing structure, such as a shipping container, into a tiny home.
To have a livable space, you’ll have to meet some basic needs with utilities like water and electricity. Depending on the location of your tiny home, you may need to hook utilities up to a water line, an outlet and a city sewer or a septic tank.
If your house is located off-grid – meaning there’s no access to utility sources – you may need to collect rainwater or dig a well, use residential solar panels and install a septic system.
Wherever the location of your home, utility hook-ups can be an expensive part of a tiny house.
How your tiny home is built will determine what type of insurance you’ll need. If your tiny home stands on a permanent foundation, you’ll probably get mobile home insurance. If your tiny house is built on a trailer or converted from a van, you’ll most likely qualify for RV (recreational vehicle) insurance for your small home on wheels.
Most tiny homes will not qualify for a traditional mortgage, so owners either pay cash out of pocket or take out a personal loan to pay for their home.
Whether your mini house is manufactured as an RV or is converted, like a van, be sure to look into reclassifying your home as an RV with your local DMV. An RV classification opens up some RV loan options, which will typically have lower interest rates and longer loan terms than a personal loan.
If you’re planning to build a portable tiny house, you may need to factor in how much a trailer for a tiny house is going to cost. The average cost of a new or custom-made tiny house trailer may range from about $4,500 – $9,000 plus shipping or delivery fees.
If you can’t downsize your life and all of your things to fit your new lifestyle and home, you may have to rent a storage unit to hold it all.
On the flip side, as part of your downsizing strategy, you could potentially earn some money by selling your items through a garage sale.
Tiny houses are not guaranteed to appreciate the way a regular home will. In fact, tiny homes can actually depreciate, especially if it’s customized to your wants and needs. Tiny homes, like other examples of alternative housing, also fall into a very niche market, so it may be harder to sell your home.
Are you thinking about building or buying a home? Learn what you can expect at various price points, and know that you may be able to buy a higher-tier tiny home that has already been lived in for less money than a new tiny home.
These cheaper tiny houses on wheels will likely be some of the smallest ones – usually 100 to 200 square feet – since you pay by the square foot. They may not include a bathroom and will be the most bare-bones structures of them all. Still, you may be able to buy a higher-tier tiny home that has already been lived in for less money.
Tiny homes under $50,000 typically use inexpensive materials and offer less space. However, these homes typically have a bathroom and separate space for sleeping.
Tiny homes in this price range will be a little bigger and come equipped with everyday conveniences, like a more spacious kitchen and living area and almost a full bath – a whole three-quarters!
With a tiny home under $100,000, you’ll start seeing more customized features, additional rooms and high-end fixtures. The materials used are more expensive in this price range too.
These homes will most likely have the maximum square footage of 400 and be tricked out with all the luxury that can fit in the small space. That includes amenities like granite countertops, custom-built appliances, posh lighting and a spa tub.
Tiny house living brings plenty of challenges and may or may not be the right lifestyle for you. It’s definitely not for the claustrophobic.
For others, it could be the perfect option. Here are a few pros and cons a prospective home buyer should consider about house size before moving into a tiny house.
A tiny home can help you pay off debt, save money and lower your environmental impact, but you may need to sacrifice your space, privacy and comfort to do so. While tiny houses are typically less expensive than a normal-sized home, you may not be able to get a mortgage to pay for them.
If you’re unsure whether this lifestyle is for you, take tiny home living for a trial run by staying in one for a vacation or weekend.
Find out what your options are for buying property to build a tiny home on by starting the application process today!
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In a new survey by Rocket Homes of 500 alternative homeowners, 78.6% said they are happy with their home purchase.