UPDATED: Jan 27, 2024
Homeownership is a big accomplishment that keeps you rooted in one spot and maybe even inspires you to upgrade your home to make it eco-friendly – but it can also come with big debt. So, is there a way to enjoy the benefits of homeownership without experiencing the financial challenges associated with buying and maintaining a traditional home? Enter the tiny house movement.
The movement is a cultural effort that promotes downsizing and living a simpler lifestyle in smaller spaces with increased financial freedom. Tiny house living can be a way to reduce debt and save money or spend it on other goals like travel, education or a well-funded retirement.
If these principles are important to you, read on to learn more about tiny homes, including the average – and sometimes hidden – costs to build tiny homes and decide whether they’re the right size for your biggest goals.
Structures that measure 100 – 500 square feet are typically considered tiny homes. While they’re much smaller than traditional homes, tiny houses provide most of the comforts you’ll enjoy in larger homes, including a full-sized or queen-sized bed, a bathroom, a kitchen and a living room – just on a much smaller scale.
The average cost to build a tiny house is $30,000 – $60,000. But it can cost as little as a few thousand dollars or as much as you are willing to spend on a very small property. 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 building a customized tiny home will largely depend on building materials, the amenities you choose and additional expenses.
For example, a $10,000 house may lack basic necessities like a bathroom, which is typically required under local building codes. Higher-priced tiny homes – usually more than $50,000 – typically include more luxuries, like granite countertops, stainless steel appliances and other high-end finishes.
Still, the current average cost of building a traditionally sized house is just north of $280,000. With a tiny house, you may be able to get the bells and whistles in a home for less money, but it comes at the cost of less space.
While many people opt to build tiny houses, the cost of land and building materials can add up quickly. Demand for building materials has increased over the years and caused a 5% – 10% rise in prices. Some materials can be hard to get your hands on, so it’s important to plan early and account for extra delivery time.
You should also consider the cost of human error, too. If your tiny home is a DIY project, even one mistake can cost you extra time and money. It may be worthwhile to hire a professional who specializes in tiny homes.
With lower prices than traditionally sized homes, tiny house owners may think they’re getting an oversized bargain. However, buyers should consider the hidden costs and other factors before downsizing for a deal.
Depending on where you live, you’ll have to follow the local zoning laws for tiny homes. For example, zoning laws may dictate that tiny homeowners can’t place their homes on a friend or family member’s land for free.
It’s a good idea to work with a property surveyor to learn the boundaries in your location. A survey can cost around $100 – $600. Some urban and suburban communities have strict regulations. You should contact local government agencies to check zoning laws to avoid any issues and fines.
Several tiny house communities have sprung up in pockets of the country without zoning restrictions. Often, these microcommunities promote sustainability by offering communal spaces, like firepits, fitness centers or outdoor picnic tables.
You’ll likely need a building permit to build your new home up to local building codes and legally occupy it. Before you build, refer to Appendix Q. It’s a uniform set of construction standards for mini homes.
However, some codes haven’t been modified for tiny houses. You may need to consider the cost of hiring a contractor or builder who knows the codes and standards.
At the very least, you may need to hire an electrician to ensure the home’s electrical components are safely installed and don’t pose a fire or electrocution risk. You should also consider this approach even when converting an existing structure, such as a shipping container, into a tiny (or not) home.
A livable space requires utilities like water and electricity. Depending on the location of your tiny home, you may need to hook it up to a water line, an outlet and a city sewer or a septic tank.
If your house is off-grid – meaning it’s not connected to public utilities – you may need to collect rainwater or dig a well for water, use residential solar panels for electricity and install a septic system to handle sewage.
Wherever your home is, utility hookups can be an expensive part of the tiny house life.
How you build your tiny home will determine the type of insurance you’ll need. You’ll probably get mobile home insurance if your tiny home is attached to a permanent foundation. If your tiny house is built on a trailer or converted from a van, you’ll most likely qualify for recreational vehicle (RV) insurance.
If you plan on building a portable tiny house, factor in how much a trailer may cost. The average cost of a new or custom tiny house trailer may range from $4,500 – $9,000, plus shipping or delivery fees.
You may need to rent a storage unit if you can’t downsize your life and personal belongings to fit your new home and lifestyle.
Otherwise, you can organize a garage sale as part of your downsizing strategy and make some money selling off your possessions.
There are many types of tiny homes to consider. The structure you choose can depend on your goals or how much land you have. To identify the tiny home best suited for your lifestyle, consider all your options and how they may impact the final price.
Some popular tiny home structures include:
Below are the most common tiny houses and the average cost to build them.
Tiny House Type |
Average Cost |
Tiny House On Wheels |
$60,000 – $80,000 |
Prefabricated |
$4,000 – $140,000 |
Tiny House On A Foundation |
$35,000 – $68,000 |
Shipping Container |
$20,000 – $50,000 |
Bus |
$30,000 – $130,000 |
On average, tiny homes cost $160 per square foot. The size of a tiny house is a critical value factor because it determines the number of amenities you can have. Here’s what you can expect to pay for different sizes of tiny homes.
Tiny House Size By Square Feet |
Average Cost Of A Prefab Tiny Home |
Average Cost Of A Custom Tiny Home |
100 |
$20,000 – $25,000 |
$25,000 – $40,000 |
200 |
$40,000 – $50,000 |
$50,000 – $80,000 |
300 |
$60,000 – $75,000 |
$75,000 – $120,000 |
400 |
$80,000 – $100,000 |
$100,000 – $160,000 |
500 |
$100,000 – $125,000 |
$125,000 – $200,000 |
These smaller tiny houses on wheels will likely be some of the cheapest you can buy since you pay by square foot. They may not include a bathroom and will be the most bare-bone structures. Still, you may be able to afford a higher-tier, pre-owned tiny home for less.
Tiny homes around 200 square feet are typically made with inexpensive materials and offer less space. They usually have a bathroom and a separate space for sleeping.
Tiny homes of this size usually feature everyday conveniences, like a spacious kitchen and living area and almost a full bath.
You’ll start seeing more customization, additional rooms and high-end fixtures with a tiny home around 400 square feet. The building materials are more expensive in this size range, too.
Most tiny homes don’t qualify for a traditional mortgage. Buyers either pay cash or take out a personal loan.
Consider applying for a land loan if you’re buying land to use as a permanent foundation for your tiny house. Land loans typically require a large down payment or a high credit score. You can also apply for a construction loan to cover construction and the cost of contractors, designers and architects.
Whether your mini house is manufactured as an RV or converted from a vehicle, like a van, look into reclassifying your home as an RV with your local DMV. RV classification opens up RV loan options. You’ll typically get lower interest rates and longer loan terms than a personal loan.
Tiny house living may or may not suit you. It’s definitely not for the claustrophobic. For others, it can be the perfect option.
Here are some pros and cons prospective home buyers should consider about house size before moving into a tiny house:
Some benefits of buying a tiny home can include:
Some possible drawbacks of buying a tiny home can include:
A few money-saving techniques can help you stay within your budget to build a tiny home. Here are some ways to slash costs:
Let’s get the answers to the most commonly asked questions about tiny houses and their costs.
The cost of a tiny house depends on its quality and whether it’s a custom-build or a prefab. A basic kit can cost between $6,000 – $8,000. Building a custom tiny house with add-ons can cost $100,000 or more.
A tiny house isn’t guaranteed to appreciate like a traditional home. In fact, tiny homes typically depreciate, especially fully personalized homes. And because alternative housing is a niche market, it may be challenging to sell your home.
With the proper maintenance, tiny houses can last as long as traditional ones. Their durability will largely depend on their construction and building materials. Tiny houses built on trailers may require more frequent maintenance than homes built on permanent foundations, which can last longer.
With the money you save buying a tiny home, you may be in a better position to pay off debt, save money and lower your environmental impact. A tiny home may mean sacrificing space, privacy and comfort. But for many people, the benefits outweigh any sacrifices.
If you’re unsure whether this lifestyle is for you, take tiny home living for a trial run. You can stay in one for your next vacation or long weekend off.
Explore your tiny home living options and connect with a Verified Partner Agent from Rocket HomesSM today!
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