My husband and I enjoy our summer road trips together. Along the way, we have noticed many fellow travelers pulling tiny homes with them. Since we are becoming more frequent travelers, we’ve often discussed whether a tiny home would be a smart financial move. However, after learning about these 10 hidden costs of tiny homes, we are reconsidering our plans.
10 Hidden Costs of Building Tiny Homes
With many first-time homeowners getting priced out of the housing market, alternative options are gaining popularity. Tiny homes are especially attractive because of their low costs and mobility. However, they may not be as cost-effective as you might think thanks to these 10 hidden costs of building tiny homes.
1. Land
One of the first decisions you will have to make for your tiny home is whether you want a stationary structure or a mobile model. This alone will impact your budget since permanent structures will require you to lay a foundation, adding $5,000 – $8,000 to your total cost. But no matter which decision you make, you will either need to purchase or rent the land where you plan to keep it.
Since most jurisdictions won’t allow you to put a tiny home on someone else’s property for free, you will need to find a location to suit your needs. Remember that even if you choose a mobile design, there will still be rental fees you must factor into your total budget.
2. Loans
If you don’t have the funds to pay for construction up front, you will need to obtain financing. However, loans present another problem because many tiny homes don’t qualify for a traditional mortgage. Lenders have a minimum amount to qualify for these loans, which is usually higher than the cost of a tiny home.
This leaves you with less desirable options such as a personal or RV loan which will have higher interest rates. Although it will give you the cash you need, it will cost you more in the end.
3. Zoning Laws
Before you start construction, you should also learn about the zoning laws for where you want to live. Municipal laws vary, so you will want to check if any building, zoning, land use, or inspection regulations would apply to your situation. Then, you will need to get the proper permits to ensure you are in full compliance with the local laws.
If you attempt to circumvent the laws, you could find yourself in a very expensive predicament. In addition to penalties, some local governments would require you to remove any construction that was completed without prior authorization. Although these processes can be tedious, it can save you a lot of time, trouble, and expense.
4. Insurance
Any time you accept a housing loan, lenders will require you to carry homeowners insurance. However, it is even more important for those who travel with their tiny home.
Since your home comes with unique risks, it can be difficult to find insurance coverage. Getting official certification from NOAH (National Organization for Alternative Housing) can improve your chances. And sharing details about the construction with your provider could present different coverage options. But no matter how you look at it, you need insurance to protect your investment and your financial future.
5. Materials
The cost of building materials has skyrocketed since the pandemic. However, supply chain issues and rising inflation have exacerbated the problem. Unfortunately, material costs remain high. So, it is much more expensive to build a tiny home now than it was a few years ago.
To put things in perspective, it costs somewhere between $20,000 to $60,000 to build a midrange tiny home. And buying a pre-built one is even more expensive since they usually cost somewhere in the neighborhood of $75,000. When you look at the material costs, people quickly realize that tiny homes aren’t the bargain they expected them to be.
6. Customizing Your Tiny Home
Although the typical tiny home is 500 sq ft or smaller, you wouldn’t think it would cost much to customize the space. However, high-end finishes, custom builds, and extra amenities will add to your expenses. If you aren’t careful, these can quickly run away with your budget.
And then there are furnishings to consider. If standard-sized appliances and furniture won’t fit the space, you may also have to pay more for compact models designed for the space. All of these extra expenses erode the savings of building a tiny home.
7. Utilities
In general, your utility bills will be less since it costs less to heat and cool smaller spaces. But, you will still require access to water, electricity, and telecommunications. Unless you are adopting a drastic lifestyle change, you will probably only see slight savings here.
Access to these services can get even more expensive if you live off the grid. So if you are thinking about a remote location, you may also have to factor in the costs of a rain collection system and satellite communications to make sure you have what you need.
8. Towing
You’ll also have to think about towing if you choose a mobile model. While you don’t need to purchase a new vehicle, you will at least need to rent one when it’s time to move.
And don’t forget the cost of gas as well. Since you are towing more weight, you will use more fuel. Depending on how far you are going, this could add up to a significant expense.
9. Maintenance
One of the more unpleasant aspects of home ownership is maintenance and repair costs. Although you will have this with any type of house, tiny homes endure more wear and tear than traditional homes.
And mobile ones bring even more risks. When you travel, there are more opportunities for damage to occur from road vibrations, potholes, high winds, and accidents. Any one of these circumstances could result in thousands of dollars in damage and a huge loss on your investment.
10. Storage
In addition to returning to a nomadic lifestyle, tiny homes offer the appeal of a simpler life. Many people opt for a smaller home to help them downsize and achieve this minimalistic lifestyle. Unfortunately, this is usually much easier said than done.
It’s hard for people to part with sentimental belongings. However, space is limited. If you can’t fit everything, storage could be one of the largest hidden costs of tiny homes. If you are seeking a simpler life, you will have to reduce down to the basics.
Is It Worth the Investment?
Before investing in a tiny home, this is an important question you must answer. For us, it comes down to our short-term and long-term goals for our home.
Although it brings many lifestyle benefits such as simplicity, flexibility, and more freedom to travel, it’s a huge investment with no guarantees on the ROI. Therefore, it doesn’t make sense for us, yet. However, it could be a good option once we retire.
If you are thinking about building a tiny home, talk to those who have already been there. They can offer you better insights from their firsthand experience and help you determine if it’s the right choice for you.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.
