The American dream may still be to own a home, but for some families, that home is smaller now. If you’ve grown tired of writing big checks for your rent or mortgage, you might have considered saving money by downsizing to a tiny house.

 

There are many reasons why folks have embraced tiny houses, like wanting to maintain less square footage or own fewer things. Although you may know about tiny houses through reality television shows from the past decade like “Tiny House Nation” and “Tiny House, Big Living,” small living spaces aren’t a new concept.

 

John Kernohan, co-founder and chairman of the United Tiny House Association, an organization based in Eatonton, Georgia, that supports the tiny-house movement, says the demand for tiny houses grew after the Great Recession. The economic crisis motivated people to downsize their lifestyles, and similarly, interest in tiny homes has spiked again amid the coronavirus pandemic.

 

“2020 has brought another wave, an actual resurgence, not only in the popularity of tiny homes but also in demand by consumers for tiny houses,” Kernohan says.

 

Buying a tiny house isn’t the right move for every family, though. If you’re looking to slash your living expenses by joining this new wave of homeowners, here’s what you need to know:

 

What Is a Tiny House?

So, how big is a tiny house? Tiny houses are typically 400 square feet or less and may have wheels or a foundation. These dwellings are much smaller than the average single-family home built in 2019, at about 2,300 square feet.

 

Accessory dwelling units, another type of tiny house, provide an opportunity for homeowners to add a second, smaller home to their single-family lot.

 

“These allow property owners to offer affordable housing solutions in their community and provide the homeowners with a new revenue stream,” Kernohan says.

 

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How Much Does a Tiny House Cost?

“Tiny houses have become an easy and affordable solution to owning one’s house and owning it quickly,” says Kernohan, who has been living in a 304-square-foot tiny home with his wife, Fin, since 2011.

 

But just like with traditional homes, the average cost of a tiny house varies depending on multiple factors.

 

According to HomeAdvisor, tiny houses run $45,000 on average, but they can cost more than $150,000 for highly customized homes.

 

If you have the expertise, you can learn how to build a tiny house with free plans or ones that cost under $100. Of course, you’ll also have to purchase the materials — like lumber, siding, roofing, and more — which Kernohan says may start around $12,000 to $20,000 for a basic tiny house.

 

Alternatively, you can pay a company to help. Businesses like Tiny Home Builders offer tiny-house shells that range from $26,700 to $46,000, depending on the design and length. Adding an electrical rough-in costs $640 and a plumbing rough-in costs another $480, but those don’t include attached light switches and outlets or sinks and faucets. You can either complete the house yourself or hire a contractor to finish the job.

 

If you’re looking for a custom project, Small House Society has a directory of designers and builders who specialize in tiny houses. There are tiny-house architects across the U.S., so it’s likely you’ll be able to locate one in your area.

 

You could also look for finished tiny houses and shells through resources like Tiny House Listings or Tiny House Marketplace. Costs will vary — for example, you can find a shell for $5,000 or a finished luxury home for a six-figure price tag.

 

If you don’t own land, you’ll also have to pay for tiny-house parking, aka renting a place to put your tiny house. Tumbleweed Tiny House Company, based in Colorado Springs, Colorado, notes the high demand for such parking, which may be located in recreational vehicle parks, backyard co-ops, or resort-style communities.

 

Tiny-house parking in a RV park can cost between $300 to $1,200 per month. Pricing depends on the location and amenities needed to run your tiny house, like hookups for electricity, water, sewer and septic systems, and internet. Kernohan says these amenities could be covered by your tiny-house parking fees, but they aren’t always included.

 

Tiny Homes: What Is the True Cost of Living Small?

 

While costs will vary depending on where you live and the size of your home, here are some comparisons based on the national averages for buying a single-family home vs. a tiny house:

 

Cost Comparison Between Traditional Homes and Tiny Houses
Cost Single-family house Tiny house
Average cost to buy $383,900 $45,000
Average cost to build $296,652 $51,000-$53,000
Property taxes Less than $200 to $10,000 or more per year Varies depending on tiny-house parking situation
Utilities $2,060 per year $1,440 per year
Homeowners insurance $1,192 per year $600 to $1,200 per year
Land $89,540 $300 to $1,200 per month (rent)
Sources: U.S. Census Bureau, HomeAdvisor, National Association of Home Builders, Tax Foundation, Energy Star, Tumbleweed Tiny House Company, National Association of Insurance Commissioners, Insurance Journal, Tiny House Expedition

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Financing a Tiny Home

Figuring out how to buy a tiny house can be tricky. Most dwellings won’t qualify for a mortgage, especially when the tiny house is on wheels. Luckily, you may be eligible for other financing options, such as:

 

  • A personal loan through your bank or credit union
  • An RV loan (if the tiny house is on wheels)
  • Financing your tiny home directly through a builder like Tiny Heirloom
  • A home equity loan (if you currently own a house)

Regardless of which option you choose, lenders will review your creditworthiness — including your credit score, credit history, total debt, and income — to determine your eligibility and the loan amount, term, and interest rate.

 

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Additional Tiny-House Expenses To Consider

Before diving into tiny-house living, you should craft a budget to estimate your expenses. Here are some hidden costs you’ll need to consider.

Transportation and towing costs

You may need to call a professional towing service to move your home. Depending on the size of your tiny house, where you’re moving to, and the time of year, you could pay up to $3.25 per mile, according to Rocky Mountain Tiny Houses.

Renting or purchasing land

As we mentioned earlier, the cost of renting or buying land for your tiny house depends on the location and amenities. Tiny-house parking costs between $300 to $1,200, and you may need to spend more on internet, electricity, water, sewer or septic systems, or on-site laundry. If you own the land, you must pay annual property taxes.

Cost of appliances

While purchasing new gadgets for your home is never cheap, you may end up paying extra for custom-size or portable appliances. For example, a tiny-house electric refrigerator costs anywhere from $150 to $3,000 or more. You should also plan to budget for maintenance, which costs $171 on average for each appliance, according to HomeAdvisor.

Home insurance

The cost to insure a tiny house depends on multiple factors, like with a traditional home. Premiums range from $400 to $1,500 per year, according to Policygenius.

 

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Is a Tiny House Right for You?

Buying a house is a big decision — even when it’s a tiny house. Here are some pros and cons to consider before investing your money in this type of property.

Tiny house pros

  • Affordability: Many tiny houses are cheaper to buy and maintain than larger, traditional homes. “Areas throughout the country with housing issues have recognized tiny homes as a viable solution for the affordable housing crisis in their communities,” Kernohan says.
  • Easier maintenance: Reduced square footage means fewer areas to maintain. “Less space means less time cleaning,” he adds.
  • Eco-friendliness: If you’re worried about your carbon footprint, a tiny house may require less energy and create less waste than a traditional home. According to Constellation, an energy company in Baltimore, a tiny house usually has about six lightbulbs — compared to 45 in average homes — and uses 7% of the energy that a typical home requires.
  • Income potential: If you own another home, your tiny house could become a rental property and generate revenue for you. According to Kernohan, tiny house rentals are in demand. “We have been booked solid throughout this year for our tiny house rentals,” he says.

Tiny house cons

  • Tougher to finance: If you need to borrow money to purchase your tiny house, you may not have access to rock-bottom mortgage interest rates. Instead, you may qualify for a personal loan, builder financing, an RV loan, or a home equity loan.
  • Parking fees: Tiny-house parking may be the biggest issue for owners of tiny homes, according to Kernohan. Zoning laws vary from location to location, impacting where you can park. He says it’s important to know where it’s legal to place your tiny home so that you don’t spend all of your time moving around.
  • Lack of privacy: Tiny houses may be less appealing if you need more personal space. “Being together in close quarters might be detrimental to some relationships,” Kernohan says.
  • Less space: Learning how to live in a tiny house may be more challenging with a lot of belongings. “We had to make some hard decisions on what to keep and what to get rid of,” he says.

 

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The Bottom Line

Buying a tiny house is a big decision. The logistics you need to figure out include where to buy a tiny house, how to pay for it, and where to park it. You’ll also need a plan for downsizing your belongings. Before taking the plunge, Kernohan suggests learning more about the lifestyle and seeing some tiny houses in person. You could attend a tiny-house festival, reach out to a builder, or rent a tiny house for a weekend to test it out.

 

“Only you know what is best for your lifestyle, so follow your instincts,” he says.