Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
Being a homeowner is part of the American Dream. However, as housing prices continue to rise along with mortgage rates, that part of the dream becomes more and more difficult to achieve. A mortgage is one of the biggest expenses in life and, depending upon the terms of the loan, by the time the loan is paid off, you've likely paid twice the original cost of the house. The alternative of living in an apartment for years and years with nothing to show for it in the end may not be the ideal choice either.
There's a way to invest money into a home of your own without breaking the bank: a tiny house. Tiny houses are the latest trend in minimalist living. They may be small, generally between 100 and 400 square feet, but they're designed to be compact, with all the necessities packed into multi-use spaces. They can be constructed to be mobile by having wheels or being built on a trailer; or, they can be permanent fixtures placed on a concrete slab, similar to a garden shed.
The money you can save from buying a tiny house varies depending upon where it's located, its construction materials, how it's heated and cooled, etc.
The Costs of a Tiny House
The main cost depends upon how handy you are with a hammer. Tiny houses can be built for as little as $8,000 if you're able to do the work yourself, but the average cost to build one yourself is $23,000, quite a savings from the average cost for a traditional home, which is $275,000. However, if you look at the cost per square foot, an average house costs $150 per square foot, while tiny houses are much more expensive, averaging $300+ per square foot.
Of course, when you buy a home, it includes land. This is usually not the same for tiny houses, so buying land will add to the cost. There's a way around this, though. Because tiny homes take up such little space, many tiny house owners will work out a deal with a landowner to be able to put a tiny home on his or her property. This works best with tiny homes that are mobile.
Because tiny homes cost much less to build than traditional ones, people use high-quality building materials and don't need to cut corners. Appliances for tiny homes may be smaller, but they're not necessarily cheaper. A number of other factors are at play as well.
Taxes and Insurance
Both homeowners insurance and property taxes are based on the value of your home. A $50,000 home is obviously going to cost much less than a $200,000 home. Tiny homes made to be mobile may be considered RVs. These non-permanent structures wouldn't be taxed at the same rate as permanent housing. It's best to check the rules and regulations regarding tiny houses in your jurisdiction.
Smaller homes tend to be more energy efficient. Quite simply, there's less space to heat or cool. Additionally, alternative types of energy are often used in tiny houses, such as solar panels. Propane is also a good choice for heating and cooking because it's often cheaper than natural gas and can set up with aboveground tanks. For sewer, they often use composting toilets instead of being connected to a sewer line. In fact, tiny houses make it easy to live off the grid, if that's your goal.
Considerations When Buying a Tiny House
Let's be clear; it's not going to be easy. Living small requires a ton of concessions on your part.
Moving into a tiny home will surely require a lot of downsizing. To live comfortably in such a small place, you'll have to strip your possessions down to the bare necessities. Rethink your life and consider the material things you've accumulated along the way. What do you need to live? What do you need to remain happy? The items that you purge can bring you money to help pay for your tiny home. Have a yard sale or sell them on eBay or Letgo. If you're not someone who can let it all go, you may have to include the cost of renting a storage unit when determining costs.
Most tiny homes don't have enough space to house a washer and a dryer, so there's the added expense and hassle of dragging your clothes to the laundromat.
You'll probably have to make frequent trips to the grocery store, because you won't have enough room to store a lot of excess food. You can cut up your membership card to that buy-in-bulk store.
To live in a tiny house, you'll have to embrace a minimalist lifestyle. Even if you put your things in storage, you'll be living every day with only necessities. If necessities include a closet full of hundreds of shoes, then tiny house living may not be your thing.
Saving money on a mortgage is one of the biggest draws to tiny house living. A whopping 68% of all tiny house homeowners have no mortgage, compared to 29.3% of the rest of homeowners. However, it can be difficult to get a mortgage. You may have to obtain a personal loan if you need to finance your tiny home.
Tiny houses are a trend, which could mean the resale value won't hold up over the next decade. It's a niche market that may not appeal to the mainstream buyer. However, using high-quality materials will help, and its location, if it's not mobile, will affect its resale value.
Regulations can be tricky for tiny houses. Depending upon the municipality, there may be hefty fees involved.
You'll have to come up with creative storage solutions for things such as rakes, your lawnmower, and other yard equipment. Your car won't be protected from the elements.
Little Room for Others
If you're someone who likes to entertain, a tiny house might not be the right choice, but in areas where it's warm year round, the outside space can be used for living and entertaining space.
There's little doubt that living in a tiny house will save you money. In fact, according to Tiny Living, 55% of people who live in tiny houses have more money saved in the bank (an average of $10,972) than average Americans do, and 65% of them have no credit card debt at all. It'll also affect your spending habits. When you have little room to keep things, you'll be less apt to overbuy.
While living in a tiny home can be solely about saving money, it can also be a way to de-clutter your life and your mind. Without all that stuff, life can be simpler and less stressful.