Tiny Home Air BnB Investment: Calculating ROI

Tiny Home Air BnB Investment: Calculating ROI

ROI is essential when considering any investment, and a Tiny Home Airbnb is no different. With more Americans working from home than ever before, it’s no surprise that Tiny Homes are a hot commodity.

We all want the same thing- more financial freedom, time with our families, the flexibility to travel, a smaller economic footprint, and, if possible, to avoid a 30-year mortgage.

Tiny homes are among the fastest, most clear-cut paths to financial freedom, a straightforward investment opportunity for anyone who wants to get into the host share space.

This article will break down the return on investment (ROI) that you can expect with a Tiny Home Airbnb. 

Example of Tiny Home Airbnb

The Typical Investment

On average, a Tiny Home costs $75,000 and requires a $15,000 down payment. This calculates to $500 a month (not including utilities). If a full solar and septic setup is needed, this could run an additional $20,000. 

When placing the Tiny Home on already owned land, there are no new property taxes; however, if there is a need to purchase land, the investor is looking at an additional cost for land and property taxes. Also, consider the cost of insurance on the property, and what extra insurance could benefit an Airbnb.

If the funding is available, a Tiny Home Airbnb can have a massive impact on financial freedom. Once an investor is ready to move forward, there are several essential questions that a potential builder should be asked, including:

Can the Tiny Home be customized? What can be added to ensure the home is energy-efficient and short-term stay-ready?

ROI Cost Breakdown of a Tiny Home Airbnb

Let’s look at an example of the ROI that one can see on a Tiny House Airbnb. Consider that, on average, the cost to rent a Tiny Home is $125/night. With a 75% occupancy average, the owner is looking at bringing in $2,812.50 a month. Take out the $500 a month payment for the loan and $300 for utilities and insurance, and it is providing a $2,012.50 profit!

Imagine if a community was built on an already owned piece of land: Placing five homes together would increase your ROI and be a quick way to financial freedom, bringing in $10,062.50 a month.

Next, let’s look at the same scenario if someone needs to purchase land. Say the land costs $100k, and a community is created, including ten lots on the land. Then the owner allows people to park their Tiny Home for $650 a month, excluding electricity. You have now paid $10k per lot for the chunk of land, and the investment for your Tiny Home Airbnb community will be made back in less than two years. 

These numbers will fluctuate based on if the investor owns their land or if the land will be an additional purchase.

So how do you break down these numbers as compared to another deal? We like to use the tools available on the Bigger Pocket website.

Cash on Cash – How soon will the investor get the down payment or hookup money back? The answer is about a year at $2k positive cash flow a month.

Net Operating Income (NOI) – Monthly revenue generated ($2,012.50)

Cap Rate – Assuming you paid cash what percentage return could you expect. ex. $80,000 = (2,012.50 x 12) = $24,150 a year = 30% cap rate

1% rule – If you rent for 1% of your total cost to purchase property = good deal. With our $80,000 example, making $2,812.50 a month, you are looking at a 3.5% deal. This percentage would be nearly impossible with a traditional rental property.

Example of Tiny Home Airbnb

Pros of Investing in a Tiny House Airbnb

There are many pros to investing in a Tiny Home Airbnb:

  • Setting up a home as an Airbnb is pretty straightforward, as the website walks through what needs to be uploaded and provides all the tools required.
  • One of the biggest pros is that Tiny Homes are in high demand, and are holding more value than ever before. Another pro is that the homes do not take much upkeep and can last just as long as a traditional stick-built home.
  • Airbnb alone has over 14,000 Tiny Home listings, with more being added all the time.
  • Tiny Homes can be incredibly energy-efficient, especially when using SIP panels to build them. These lightweight, self-supporting panels keep the air from escaping creating lower usage of heating and cooling systems.

Cons of investing in a Tiny House Airbnb

The biggest cons to be aware of when considering a Tiny Home Airbnb investment would be:

  • Regulations in some towns can be strict or limit the number of days someone can stay in a rental location.
  • Financing can also be an issue for some banks, but most builders have companies to work with to create ease of financing for clients. 
  • We partner with the best financial firms in the industry, contact us today so we can connect you.

What to Consider Before Buying a Tiny House

Before purchasing a Tiny House for an Airbnb, some factors need to be considered.

The first step is typically to contact the city to get information about the zoning and land use laws. determining if the land can be divided to include more lots.

Next is looking at the laws and restrictions of the area you’ll place your Tiny Home Airbnb investment. If creating a community with several lots, the cost will need to be calculated on the price for each site and what utilities/amenities will be on-site (laundry room, bathrooms, showers, etc.). 

Extra tips to boost your profit

Starting with one rental and growing is the best way to get your feet wet in the host share space. Here are just a few extra things you can do to increase your profit:

  • Build Communities – create a community with amenities, spaces that homeowners can purchase, or areas with tiny houses as long-term rentals.
  • Use your own backyard – if you already own land, even a residential home, you can still add a tiny home for supplemental income in most cities.
  • Influencers – working with influencers who are videographers, photographers, or bloggers is an excellent way to build attraction to the rental. It is a perfect advertisement for both parties, and many Airbnb owners have seen an even higher ROI when partnering with influencers. 
  • Create a one-of-a-kind experience for the guests. If your property is prime for camping and stargazing, provide firewood, s’more makings, books, and games; think Disneyland type of experience.
  • If you’re near a beach, provide good towels and adequate floor mats, or transform your tiny house into a beach cottage. Give the renter something to talk about and share with others.
  • Provide the amenities that give the rental a homey feeling—coffee pot or Keurig, creamer, cookware, blankets, towels, bathroom, and shower items. Make it feel like a home away from home.
Example of Tiny Home Airbnb

Tiny houses are a highly versatile investment with several potential uses. Overall, the ROI of a Tiny Home Airbnb can be pretty high, a short path to financial freedom.

With options to customize and create a unique home, Turn Key Fabrication can build something that stands out and is highly desirable for your upcoming guests, so contact us today and let’s get started! The quick path to financial freedom with an Airbnb business can lead to retirement funds, an increase in a savings account, allow for further investment or expansion of business, or just allow for more financial freedom for traveling!

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Five Ways to Invest in a Tiny House

Five Ways to Invest in a Tiny House

The ways to invest in a tiny house are limited only by the entrepreneur’s imagination. Tiny or modular homes are an excellent investment option for long-term rentals, vacation properties, and host share options like Airbnb or VRBO. But did you know you can also flip a tiny house or rent space for people to put their own nomadic home on?

Turn Key Fabrication makes your investment easy by answering questions, providing information on everything prefabricated, and delivering a tiny home or room that is assembled in less than twenty-four hours, with no prior experience needed.

Are you feeling inspired yet? Here are five different ways to invest in a tiny house.

Number One: The Classic Rental

As more people are looking to reduce their carbon footprint, travel, work nomadically and lower housing costs, tiny living is becoming increasingly appealing. In fact, sixty-three percent of millennials would consider buying a tiny house.

If you think full-time housing and tiny living don’t go together, think again; tiny’s can be rented out similar to a traditional home. In most cities, a modular structure can be added as an extension on an existing residential property and leased out.

According to Business Insider, the average rental income of a tiny home would be nine hundred dollars. Clearly, there are many factors to consider when looking at this figure- initial cost of investment, the geographic location of the investment, upgrades or special features, and physical sleeping space,  just to name a few.

Number Two: Vacation Rental

Vacation rentals and tiny homes also go together. A tiny vacation rental can have a higher market value than a traditional home, especially for novelty properties (such as a yurt) or those in highly desirable geographic locations (think: beach, mountains).

Tiny living is seen as an exotic or unique lifestyle, so you’re offering more than ‘just’ a rental property when renting out a vacation home. Like all prefabrications, tiny homes can also be customized, such as for yurts, tee-pees themed spaces or rustic cabins. Turn Key Fabrication’s Tiny Room is an excellent way to dip your toes into tiny investments, especially if you’re low on space. 

Number Three: Host Share or Airbnb

A host share site is a third-party business that lists the home online, and potential vacationers book through the company directly. The big names in host share are Airbnb, VBRO, and HomeAway. Typically, a yearly fee is paid, and a percentage of the booking fee goes to the company.

Host sharing is a mostly hands-off way to add monthly income to your portfolio, and can be completely passive should you hire a property management company. Turn Key Tiny Home’s are an excellent option for a host share for several reasons. With the innovative building methods and materials that we use, you can be confident that your investment is well built, insulated, energy-efficient, and can keep up with the wear and tear of continuous use.

If you’ve got limited space and aren’t ready for an entire house, our Tiny Rooms are a fantastic way to invest. Tiny Rooms are quickly put to use as a small studio with a bed, small fridge, microwave, and sitting room.

Number Four: Flip a Tiny House

Looking for a tiny house investment opportunity but don’t have the space for one? Or maybe you’re just not a fan of buy-and-holds. How does one flip a tiny house anyway? Let’s dive in.

There is a high demand for tiny homes, especially among millennials, those living the nomadic life, and off-grid communities. However, many people interested in tiny houses do not have the skills required to repurpose a structure that someone else previously owned.  

So, how do you flip a tiny house? The most common way is by purchasing used tinys that need repair or have seen better days, then remodeling, similar to flipping a traditional home.

Online listings are the best place to find a potential flip. Websites like Tiny House Listings have a massive catalog of tiny homes for sale. This allows you to browse prefab options across the US to get a feel for the market and hunt for flipping projects.

Number Five: Rent land to Tiny Home Owners

The fifth and final way to invest in the high-demand tiny industry doesn’t require purchasing an actual prefab structure. Instead, investors who already have property can rent out space for those who own a tiny house but have no land to put it on. Here are some ways to do that. 

Firstly, consider that space can be rented on a temporary basis. This is a good fit for people who have their homes on wheels and travel around, either for recreation or as part of a nomadic lifestyle. The land becomes a temporary campsite for a few days, up to a month in some cases. 

Another investment option is creating a tiny home community. This is a location where people can rent a space on a short or long-term basis. A vacation destination place is an excellent location for such an investment community. In some situations, homes may only be occupied for a few months out of the year. Taos, New Mexico, for example, has a lot of snowbirds who hit the slopes each winter and then return home. A tiny home community allows a place to leave their tiny home year-round while only occupying it for a short time. 

Lastly, space can be leased on a more permanent basis. A yearly contract can be a significant investment, fitted for those who own a tiny home but don’t have a place to put it or are not interested in buying land. Think of this as a traditional house rental, except the property owner does not have to do any upkeep on the home, simply supply a space for them to park.  

Get Started

That was five different ways to invest in a Tiny House or Tiny Room. Are you ready to get a personalized quote? Turn Key Fabrication can fully customize any product, depending on the size and usage of the home. Contact us today- we’re excited to design a solution for your specific needs!

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