Buying a tiny house comes with several financial considerations. There are fully built homes, or you can purchase a shell or even build from the ground up, just to name a few.
Tiny homes continue to rise in popularity, with an estimated worldwide growth of $5.80 billion from 2020 to 2024. Whether in it for the financial freedom that comes with tiny living or trying to reduce the eco-footprint, there are still ongoing costs for owning a tiny home to consider.
With so many possibilities, investing can feel overwhelming, so let’s break this down.
Buying a new tiny house
A tiny home can cost anywhere from $10,000 to $100,000, depending on what all is included.
When buying a tiny house that is fully built, the price tag will be higher than buying in pieces. In addition to the base price, you can select trim packages, extended porches, added lofts, or other customizations. Add in delivery fees, a trailer (if the home will be moved often), upgraded appliances, and the cost could increase significantly.
Purchasing a fully built tiny means nothing needs to be added:
The house will have sleeping space, living room, kitchen, bathroom, and everything needed to move right in. This is the ideal option for someone who isn’t skilled in the construction area or looking to start earning income on a tiny house quickly.
Shell Built
If you want to customize the interior of a tiny home, purchasing a shell is a great alternative.
There are still options to choose such as how many square feet, lofts, and porches, but beyond that, the investor builds out the interior.
Shell-built is the right choice for someone who is confident with their construction skills, has the necessary tools, and is trying to keep costs lower. Going this route is vital to consider timelines and research the availability of appliances, flooring, and other necessary materials.
DIY
Some builders also offer DIY blueprints or packages.
If purchasing the blueprints, you’re responsible for buying all the lumber and other materials needed to build the home. This can get tricky during item shortages. Also, make sure to price out the materials needed vs. purchasing one of the done-for-you options because the pricing on lumber has hit an all-time high.
The next option is to buy a package from a builder, which typically includes the building structure materials and blueprints, and the customer builds the home on their own. While you can save time going this route vs. acquiring the materials on your own, the price is typically higher with a builder.
Buy Pre-Owned
Buying pre-owned is a great alternative as well, as the price can be less expensive, and any additional costs outside of land needs are likely based on transporting the tiny house to the new location.
The Tiny House Listings website has thousands of tiny houses for sale (or rent) and is a great place to start looking for a completed home. A pre-owned home works well if there is no customization required and if the purchaser likes the idea of a more turnkey solution.
Always make sure to look at the house, the seals around windows and doors, the materials used, and check for a builder’s warranty.
Land
Some areas do not allow tiny homes, so learning your area’s zoning and restriction laws is essential
It is also crucial to ensure that the land being purchased has access to water, septic or sewer, and power. While there are options to live entirely off-grid with a tiny house, you will still need to consider the additional costs of a generator, solar, water tanks, etc.
An alternative to purchasing land is renting. Tiny home communities, mobile home parks, and someone else’s land are great places to start looking.
All these options should come with water, power, and sewer, one less thing to worry about.
The American Tiny House Association is a fantastic resource for finding the laws, restrictions, and zoning rules in the desired location.
Maintenance Costs
Tiny homes come with the same maintenance requirements that a traditional home has.
Keeping up on paint, servicing heating and cooling systems, checking the doors and windows for leaking, and following a regular maintenance schedule for all the appliances in the home are critical. Initially, using higher-grade building materials may increase the cost of the house; however, it can save on the longevity of the house. Make sure toask the builderabout their warranties!
There is a lot you can do to reduce monthly costs such as using SIP panels to help with heating and cooling or choosing appliances that run off propane, or using solar panels. Insurance for natural or unforeseen emergencies is highly recommended.
Getting Started
No matter what direction you want to take, Turn Key Fabrication takes pride in working with customers to make sure they leave with their dream home in mind.
Even with the spike in tiny house purchasing across the United States, the process of financing and securing insurance for said homes is still misunderstood.
A traditional 30-year mortgage is unlikely for a tiny home since they generally cost between $30,000 and $80,000. The best avenues to research are looking into a personal loan, a home equity loan if this is a secondary residence or investment property, or financing through a lender partnered with a tiny house builder.
It’s important to ask questions about what the lender will require when researching which loan is best:
Does the loan require a permanent foundation?
Is there a square footage requirement?
What are the minimum and maximum amounts for financing?
Personal Loan
These loans are typically unsecured, meaning the bank doesn’t hold anything for collateral. A personal loan has an annual percentage rate between 3-36%, with good credit. Personal loans usually have a length of seven years to pay off.
Builder Financing
Some builders can offer in-house financing for tiny homes.
In-house financing is done through a builder’s partnership with a third-party lender, so requirements and qualifications will vary.
RV Loans
Purchasing a THOW (Tiny Home on Wheels) opens up the option of an RV loan since it won’t be placed on a permanent foundation and can be moved around.
The Tiny Home will need to pass an inspection to prove it meets the standards set by the U.S. Department of Transportation’s National Highway Traffic Safety Administration and get an RVIA tag (Recreation Vehicle Industry Association).
One benefit of an RV loan is that they are often financed for 20-30 years so that the payment will be smaller than a personal loan.
RV loan rates are also lower, usually around 4%-8%. A con of this type of loan is that the tiny home will be used as collateral for the loan, so if it is defaulted on, the tiny home can be repossessed.
Operation Tiny House is a matching grant program, which could be up to $12,000 of the down payment.
To qualify, someone in the house must be a community hero or struggling with hardship. Check with Operation Tiny Home to see if qualifications are met or get on the waitlist for the next round of grants.
Examples of past Grant Qualification includes:
Military / Veteran Status
Law Enforcement
Fire Fighter
Pre-K – 12th Grade Teachers
Lives in an area affected by hurricane, wildfire, flooding, or other natural disasters
Aging out of Foster Care
Insurance
It is essential to secure proper insurance on a tiny house like any home.
Natural disasters and other tragedies (fire, flood, vandalism, etc.) are always a possibility, it’s essential to make sure the investment is covered.
There are a few options to obtain insurance:
RV Insurance
If financing the tiny home via an RV loan, this would be the best bet for getting insurance. RV Insurance is also great if your tiny home is on wheels and will be moved frequently. Extra insurance coverage that is included with RV that isn’t from traditional insurance are:
Collision
Comprehensive
Liability
Uninsured Motorist
Personal Property
Medical Payment
Mobile Home Policies
Mobile Home Insurance is an excellent option if the home will be on a foundation or rarely moved.
A comprehensive mobile home insurance policy, similar to homeowners insurance, will cover:
The Home
Personal Property
Liability Claims
If this route is taken, get a transit endorsement, so the tiny home is covered while transported.
Tiny House Insurance Specialists
With the tiny home boom that keeps growing, we will likely see more and more tiny house insurance specialists come on board.
Insurance Specialists usually offer coverage for traditional and alternative living structures, such as off-grid cabins, micro homes, storage containers, and Tiny Homes.
American Modern Insurance Group offers tiny home insurance as part of its manufactured home policies. They generally cover liability, personal property, water damage, and more.
American Family Insurance covers everything someone would need insurance for – life, business, homeowners, and auto. AFI can help find the right category for insurance coverage on your tiny home with their different policy types, including RV insurance and manufactured home coverage.
If the tiny home is in the purchaser’s backyard, State Farm is an excellent option. They can add coverage with standard homeowners insurance and list it as a detached dwelling.
Foremost offers specific coverage for tiny homes for full-time tiny home dwellers. Insurance is available through its Travel Trailer Program if the tiny house meets RVIA standards or is certified by NOAH (National Organization for Alternative Housing).
If the tiny home will be an investment property, such as an Airbnb, Liberty Mutual is a great option to look into, with options for short-term rental coverage as well as mobile home insurance. Liberty Mutual builds the insurance policies to fit each individual’s needs so that you can add on to the policy as necessary.
Taking the Next Steps
At Turn Key Fabrications, our passion is helping you customize your tiny home, and that includes financing and insurance.
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