• RTB Staff

The Tiny Home and how it differs from the ADU

Image: www.minimotives.com Although we promote ADU’s as the first option for rental income we must also look at another popular solution-The Tiny Home. Tiny homes tend to differ in a multitude of areas but here are the main differences:

  1. Tiny Homes are traditionally placed on axles and are movable.

  2. Tiny Homes are not treated as traditional real estate but more like an RV

  3. Tiny Homes are not a part of the real property like a traditional ADU There are benefits to renting, living in, and owning a tiny home and we will list them here:

Tiny Homes: The Movement Let’s talk about tiny homes-- or at the very least, the constructions that err on the smaller side. These innovative, pocket-sized houses can range from 70k a pop to being million-dollar investments, which is a shocking range of difference understandably confusing to any potential buyer. The thing is, tiny-house construction is what you make it, and usually lends itself to being a great long-term investment. Living, renting, or reselling a tiny home puts you in a good spot financially no matter what you choose, as long as you play your cards right. So consider this guide to tiny home investment an ace up your sleeve, arming you with the basic knowledge to dive into the deeper stuff head first.

Why live in a tiny home

The prospect of a mortgage terrifies as many people as it plagues-- there’s a reason so many are drowning in homeowner debt. And that’s because large, traditional homes are more expensive. The median price for a 1,800 square foot house in the US comes in at a shuddering 245k. Just think about how much of that space, which many overpay for, goes unused. This is where a tiny home holds so much appeal. They are a low maintenance, minimalist option for those looking to downscale on both size and costs, while still getting the same quality of living and design.

Why resell a tiny home

By now, you probably get the appeal of building a custom, up-to-specs, brand-new home and selling it for a huge profit. In fact, there are people who make careers out flipping properties like this. But what does that look like when you bring tiny homes into the mix? Well you’d still be making a big profit.

And the 3 step process is simple:

1.Buy The Land (Or use your yard)

2.Build The Unit (Or Have it built for You)

3.Sell or Lease The Unit

As in purchase the land you plan to build on, build your tiny home, and then sell it for a profit. And the beautiful thing about a tiny home is that, because the initial investment is lower, so are the stakes-- you have less to lose, and more to gain. And with the short construction times of tiny homes, you can increase the value of flipping these properties exponentially by reselling them back to back (while minimizing Short term financing costs); people have been known to build and resell these homes within 3-4 months from start to finish.

Renting a Tiny Home vs. an ADU

Renting a tiny home space can create endless opportunities for both your property and your income. There is a big difference in terms of acceptance by local authorities. While the ADU or Accessory Dwelling Unit has been widely adopted by local municipalities the Tiny Home is still considered the least accepted alternative option. If you are still interested in proceeding then you should:

1. Build in areas where rental rates are relatively high

2. Check with local HOA’s to figure out the best location for your tiny home rental while adhering to community standards, which often dictate where the unit can be placed.

3. Rent it for income: Renting your newly acquired Tiny Home can create a consistent stream of additional income but due to its movable nature must also be in an area where it might not be easily moved or damaged.

In conclusion, we are fans of the tiny home movement as it is in line with our minimalist thinking pattern yet it can provide a number or drawbacks that could potentially dissuade a purchaser from using it as an investment vehicle. As always, we must make the best decision given our resources, time and knowledge but given our present data we still recommend an ADU as the perfect investment vehicle but we may be a little biased.

91 views0 comments