The coronavirus pandemic hasn’t been easy on the world – millions have gotten infected, millions have become unemployed, and millions are still trapped in their homes. However, there are some silver linings throughout all of this, mainly when it comes to the real estate investing industry. It’s clear that the pandemic has impacted different sectors in the industry from commercial real estate to Airbnb properties. We can also see the impact of COVID-19 on the tiny houses sector. What are tiny houses, you ask?
As the name suggests, these are small homes (sometimes referred to as Accessory Dwelling Units or ADUs) that are typically under 500 square feet. These properties emerged in the late 1990s, but the tiny house movement began to gain attraction after the 2008 housing crisis as people were looking for cheaper alternatives to traditional homes. Subsequently, affordable tiny houses also became an alternative real estate investment opportunity as investors became attracted to renting out a tiny house for income.
During the current pandemic, some tiny home builders reported a doubling in the demand for their services. Here’s all you need to know about why the COVID-19 is driving the demand for the tiny houses, whether or not these properties present a good real estate investment opportunity, and what you need to know before investing in a tiny home in 2020.
Impact of COVID-19 on the Tiny Homes Market
While lockdowns have made it difficult to park mobile tiny houses and RVs in public places, there has been a spike in the demand for these properties according to the Global Tiny Homes Market 2020 Industry Research Report. In the report, it’s mentioned that the market was already growing at a steady rate in 2020. The report also shares experts’ forecast for the future, which is that the market will rise at a considerable rate between 2020 and 2026. This is partially due to the new interest and demand these homes are receiving these days. So, why are people suddenly interested in tiny homes?
As COVID-19 swept around the US, it affected the economy and caused unemployment to rise. Hence, a lot of people fear for their financial stability and have decided to downsize. In turn, this has motivated many Americans to get out of dense, crowded cities like New York and Los Angeles and live in tiny houses located in more isolated locations. There’s also demand for tiny homes for rent coming from homeowners looking for more space to quarantine away from their main home. Furthermore, many want to build ADUs as home offices since working from home will be a reality in the future.
Related: The 4 Biggest Reasons to Live in a Tiny Home
Take what happened to John Kernohan for an example. He is the founder and chair of the United Tiny House Association and he also owns and runs the Beloved Cabin Homestead Community of tiny homes in Georgia. According to Kernohan, there has been a spike in demand for his tiny cabin since the coronavirus outbreak began to spread across the US this spring. He added that his cabin is booked up for the foreseeable future and that there’s a backlog of people looking for a spot to park their own tiny home. The common theme behind the increase in bookings is “Individuals [wanting to] get away from larger, populated areas.”
An important note to mention is that this demand for tiny houses is coming from different groups, not just millennials. Baby boomers and retirees also want to go small and live in tiny spaces where they don’t need to worry about monthly mortgage payments. In addition, essential workers are a new tenant group increasing the demand for tiny homes for rent. These include medical staff who want to be closer to their worksite or to quarantine away from their families while treating or interacting with COVID-19 patients.
Is a Tiny House a Good Investment in 2020?
With demand on the rise, a key question real estate investors are asking is if investing in tiny houses makes for a smart decision in 2020. Here are the main reasons why some experts will tell you yes:
#1 Cheap Real Estate Investments
The first reason to consider buying a tiny house is that it’ll be an affordable real estate investment. In times of uncertainty, you’re probably hesitant about investing money whether in real estate or other investment types. But if you want to get into real estate investing, a tiny home is the cheapest type of rental property you can buy. How much do tiny houses cost? The average cost falls somewhere in the range of $40,000 – $100,000.
If you’re planning to build your tiny house to rent, it’ll cost you about $10,000 to $180,000 depending on size, location, and other factors. Either way, a tiny house investment is pretty affordable. Owning a tiny home also comes with fewer expenses. For example, many real estate investors buy tiny homes in cash and then manage them themselves. Doing this means you won’t worry about mortgage payments or property management fees.
Looking for cheap tiny houses for sale? Mashvisor allows you to find and analyze tiny homes in your city of choice in a matter of minutes! Click here to get started.
#2 Provide an Additional Income Stream
When looking for a real estate investment opportunity, investors aim to find properties that yield good returns. This could be in terms of either rental income or price application. If you’re investing in tiny houses on wheels, you should know these don’t appreciate in value over time like traditional investment properties. This is because they are mobile personal property (not permanently fixed on the land). Having said that, you can expect to earn a good income from renting out a tiny house. And who wouldn’t want an additional source of income these days? The rental income from a tiny home could even end up paying for the investment in the long term.
#3 Can Generate Money as Airbnb Rentals
Many of today’s travelers prefer to stay in non-traditional accommodations rather than a hotel room during their vacations. And over the last few years, there’s been a demand for tiny homes as short term rentals or vacation rentals. This tells you that listing your tiny house for rent on Airbnb can up your income potential even more. Due to the current circumstances, many will even book an Airbnb tiny house to quarantine away from crowded cities. But, before going for the short term rental strategy for your tiny house investment, make sure you’re in an ideal location that attracts guests and allows for a good Airbnb rental income and occupancy rate. You can use Mashvisor’s Real Estate Heatmap to find the best locations for Airbnb investments in terms of those metrics. Sign up to Mashvisor to try it out!
Related: Should You Buy an Airbnb Tiny House to Rent Out?
Where to Buy Tiny Houses for Rent in the US
Speaking of location, you must be wondering where the best places to invest in tiny houses in the US are. Location, after all, is an important factor in the success of any real estate investment. And while tiny homes are seeing a spike in demand this 2020, some states have tiny homes zoning regulations. These regulations limit where you can build or buy a tiny home. States that are most tiny house friendly and to consider are Arizona, California, Colorado, Florida, Texas, Tennessee, and Oregon. On the other hand, the least tiny house friendly states include New York, Alabama, Ohio, Louisiana, Iowa, and Illinois. You can check a full list of states along with their tiny house regulations here.
Here’s another thing for real estate investors to keep in mind when deciding where to find tiny houses. Try to find places where the demand for these homes has increased the most. For example, tiny home manufacturers in Atlanta experienced a 150% increase in demand this year compared to last. They attribute this boost to coronavirus lockdown concerns. Moreover, tiny home builders in Texas also reported that they’re currently constructing over 1,000 tiny houses around the state. San Diego is also easing restrictions and zoning regulations on where you can build tiny homes. Homeowners in San Diego are now allowed to build and install tiny houses in their own backyards!
Check out Mashvisor’s pick of the best 4 Tiny House Friendly States to Invest In.
If you already have a location in mind, you can use Mashvisor’s real estate investment tools to find tiny homes for sale and analyze their profitability based on data and predictive analytics. This way, you make sure you’re investing in something that will actually promise good returns and won’t have any tiny house regrets in the future. To learn more about how Mashvisor helps you make faster and smarter investment decisions, click here.