If you’re thinking about investing in real estate, you might be wondering if tiny homes for sale are worth the money.
Table of Contents
- What Is a Tiny Home?
- The 2022 Real Estate Market Effect on Tiny Homes
- Benefits of Investing in Tiny Homes for Sale
- Ways to Invest in Tiny Homes for Sale
- How Much Can You Charge if You Rent It?
- Where to Buy Tiny Homes for Sale
- 10 Best Locations for Renting Out Your Tiny Home
The main question is whether small houses are financially beneficial. Such types of residences are not for everyone. However, for certain people, tiny homes may represent big profits.
Tiny houses continue to grow in popularity alongside minimalist and eco-friendly living styles. They may be purchased and sold using various traditional real estate techniques.
However, there are certain unique factors to be aware of before getting started. Continue reading to learn about the benefits and drawbacks of small house investing and how to get started right away.
What Is a Tiny Home?
A small home is a residence between 100 and 400 square feet in size, with an efficient design to maximize space. In the US, the average size of a single household is 2,500 square feet. Tiny homes frequently contain big windows, high ceilings, and furnishings that provide many functions to compensate for the lack of space.
Tiny houses can be constructed in various ways, either as mobile residences or permanent constructions. Several tiny homeowners build their own dwellings from scratch, while others transform existing structures into small homes.
Sheds and warehouse containers, for example, can be turned into tiny residences. They supposedly appeared first in the 1970s. However, they’ve gained popularity in recent years.
The 2022 Real Estate Market Effect on Tiny Homes
According to the industry study “Tiny Homes Market by Product and Geography – Forecast and Analysis 2021-2025,” the market increased by 2.78% in 2021. It will continue rising until 2025, with a CAGR of 4% throughout the forecast timeframe. The study is divided into two sections:
- Product (Small mobile residences)
- Geography (North America, Europe, APAC, South America, and MEA)
The small house market is divided, and suppliers are competing by using numerous organic and inorganic development tactics. As the market gets increasingly competitive, vendors are being forced to employ various growth strategies such as promotional events and advertising to raise the exposure of their goods. Some suppliers seek inorganic expansion strategies such as mergers and acquisitions to remain competitive.
During the projected period, North America will present the most prospects for growth in tiny houses. According to the study, the country will account for 58% of global market growth and will continue to dominate the market throughout 2025. North America will create change over the projection period. During this time frame, year-on-year growth is expected to be 2.78%.
As of newer data—from 2021 to 2026, the tiny home market share is predicted to expand by $3.57 billion, with the market’s growth accelerating at a CAGR of 4.45%.
Benefits of Investing in Tiny Homes for Sale
As you may expect, the primary advantage of tiny house investments is the price. Tiny homes offer lower purchasing prices than typical residences due to their modest size. Many investors will be relieved to learn that the price is not the only benefit. Their other advantages include:
1. Greater Profit Potential
Investors will be able to generate passive income from tiny homes for sale by renting out their houses for either an extended period of time or for a shorter period of time.
Moreover, tiny residences generate better rental yields due to their cheap purchasing cost. For example, if you pay $70,000 for a little house and rent it out 20-30 times per year for $150 each time, your average rental return is around 6%.
Furthermore, tiny apartments rent for an average of $200 per night, with some commanding up to $400, implying that rental returns for popular listings might be significantly higher.
2. Lower Utility Costs
Smaller homes tend to require lower utility needs. It can save money for investors, owners, or tenants throughout the course of the property’s ownership or rental period.
Because tiny houses are so small, they use less energy to heat, cool, and keep the power on. Furthermore, many are self-sufficient and rely on solar panels for electricity, potentially cutting energy bills to zero.
3. Lesser Environmental Footprint
It should come as no surprise that a friendlier lifestyle to the environment is related to living in a smaller home. Because of their compact size and minimal maintenance requirements, tiny homes for sale are designed to exert a less overall impact on the environment.
Moreover, tiny house upkeep is simple since there is a smaller area to clean, less equipment to maintain, and no gardens. It also implies that maintenance costs are lower, which will attract many potential investors.
4. Periodic Location Mobility
If you choose a tiny house that is mobile instead of a traditional one, the location is flexible over time. Any real estate portfolio may benefit from including such flexibility, which can make for an interesting investment.
Owners enjoy more flexibility in terms of location. They may potentially take their tiny home with them wherever they go. In addition, when it comes to selling, a tiny house may be relocated to any state, expanding the potential buyer market.
Ways to Invest in Tiny Homes for Sale
When considering “is buying a tiny house for sale a wise investment?” It is critical to understand that small home investment may take numerous shapes. Several real estate investment ideas can be used to make a tiny house profitable. The following are some of the most common ways to invest in a tiny home for sale.
1. Rent for Recreational Purposes
Tiny apartments can become excellent short-term rentals depending on the marketplace. You can list the property on an online rental platform and manage it yourself or work with a property management firm. In any case, adding a small house investment to your portfolio might result in a consistent source of passive income.
2. Build One Yourself
Building a tiny house may be a successful plan with an effective operation. You can either sell the finished home or lease it out over time when you’re finished building.
The most crucial consideration here is to develop an efficient setup. Consider scheduling, permits, and supplies, since the expenditures may rapidly add up, even on a small task.
3. Think About Monthly Rentals
Tiny house investments can also be rented out every month to long-term renters. Long-term rents allows tenants to explore the lifestyle in a little house without the responsibility of purchasing. Monthly rentals enable investors steady passive income and a hands-off approach to property maintenance.
4. Flip Existing Tiny Houses
Surprisingly, small houses are ideal for fix and flip properties. It is because the risks are frequently lower when purchasing cheap tiny homes for sale. In most cases, investors can repair the buildings and sell them for a profit in about six months. You may even establish a network of proprietors and other investors through time to bring in constant prospects.
Related: Real Estate Investment Strategies Guide: Fix and Flip
How Much Can You Charge if You Rent It?
Tiny house businesses make a profit from tiny houses. However, renting out small dwellings is also an option.
Tiny homes range in price from $5,000 to $60,000 or more. Some may find tiny homes for sale under $10k and rent them—others may find mobile homes for sale under $5,000 and try to fix and flip them. However, the house’s dimension, location, and features determine the actual price.
If you opt to rent out your little house as a hotel, you may charge up to $200-$400 each night. People are prepared to pay considerable money for a short stay in a tiny house to see whether such a way of life appeals to them and to discover what all the buzz is about.
A tiny house business may produce six figures quickly. Profitability depends on overhead expenses, the number of homes you can create/buy, and the local real estate marketplace. Moreover, if you continue to build/buy and market tiny houses, you may even end up owning a multi-million dollar company within a half-decade.
Where to Buy Tiny Homes for Sale
Tiny houses may be inexpensive, mortgage-free investment property. Moreover, the pandemic may have boosted regular, and short-term rentals demand over the last two years. So, your little home may be easy to rent immediately after purchase. However, keep one tip in mind: plan carefully to have a good investment for the drawbacks.
When it comes to buying tiny homes for sale, there are many investor-friendly real estate platforms out there. You can consider Mashvisor or Tiny House Listing to search for the ideal mobile tiny homes for sale for this specific case.
Let’s see some of the best places for various types of tiny homes for sale:
- Best place for used tiny homes for sale: You can find some of the best tiny houses for sale in Portland, Oregon. It is tiny-home friendly, and there is even a website called Tiny Heirloom that offers many used small homes for sale.
- Best place for luxury tiny homes for sale: if you want a little luxury house, try California. It’s permitted in many regions to own a small home of less than 200 square feet if you live there full-time.
- Best place for tiny homes on wheels for sale: Try searching for one in southwest Colorado. You can even find a whole village dedicated to it—Escalante Village, a tiny home-on-wheels residential neighborhood launched in 2019.
Bonus tip: Rockledge, FL, is home to some of the country’s most well-defined small house rules. Pocket Neighborhood’s tiny house size laws enable properties from 150 to 700 square feet. Within two zoning areas, the city’s small home regulation distinguishes between tiny residences and mobile homes on wheels.
10 Best Locations for Renting Out Your Tiny Home
According to the most recent Mashvisor data, you can find the top five US cities for traditional rental with the highest traditional cash on cash return and the top five cities for Airbnb rental with the highest Airbnb cash on cash return. Let’s get started.
Top 5 Cities for Traditional Rental
The top five cities for traditional rental are arranged from the highest to the lowest traditional cash on cash return. It is provided according to the Mashvisor data as of May 2022.
1. Seymour, TX
- Monthly Traditional Rental Income: $2,072
- Traditional Cash on Cash Return: 9.13%
- Traditional Cap Rate: 9.55%
- Price to Rent Ratio: 7
2. Kearny, AZ
- Monthly Traditional Rental Income: $1,670
- Traditional Cash on Cash Return: 8.42%
- Traditional Cap Rate: 8.83%
- Price to Rent Ratio: 8
3. Alturas, CA
- Monthly Traditional Rental Income: $2,914
- Traditional Cash on Cash Return: 8.00%
- Traditional Cap Rate: 8.23%
- Price to Rent Ratio: 8
4. Trinity Center, CA
- Monthly Traditional Rental Income: $5,717
- Traditional Cash on Cash Return: 7.99%
- Traditional Cap Rate: 8.09%
- Price to Rent Ratio: 7
5. Logan, AL
- Monthly Traditional Rental Income: $1,579
- Traditional Cash on Cash Return: 7.79%
- Traditional Cap Rate: 8.15%
- Price to Rent Ratio: 9
Related: Airbnb Rentals or Traditional Rentals? This Tool Will Help You Decide!
Top 5 Cities for Airbnb Rental
Here are the top five cities for Airbnb rental, arranged from the highest to the lowest Airbnb cash on cash return. It is provided according to the Mashvisor data as of May 2022.
1. Shelby Township, MI
- Monthly Airbnb Rental Income: $2,801
- Airbnb Cash on Cash Return: 9.65%
- Airbnb Cap Rate: 10.07%
- Airbnb Daily Rate: $145
- Airbnb Occupancy Rate: 73%
2. Lincoln Park, MI
- Monthly Airbnb Rental Income: $2,468
- Airbnb Cash on Cash Return: 9.65%
- Airbnb Cap Rate: 10.17%
- Airbnb Daily Rate: $103
- Airbnb Occupancy Rate: 65%
3. Bloomfield, CT
- Monthly Airbnb Rental Income: $2,915
- Airbnb Cash on Cash Return: 9.62%
- Airbnb Cap Rate: 10.13%
- Airbnb Daily Rate: $199
- Airbnb Occupancy Rate: 64%
4. Hebron, CT
- Monthly Airbnb Rental Income: $3,937
- Airbnb Cash on Cash Return: 9.57%
- Airbnb Cap Rate: 9.86%
- Airbnb Daily Rate: $290
- Airbnb Occupancy Rate: 73%
5. Walland, TN
- Monthly Airbnb Rental Income: $3,707
- Airbnb Cash on Cash Return: 9.54%
- Airbnb Cap Rate: 9.82%
- Airbnb Daily Rate: $242
- Airbnb Occupancy Rate: 57%
Related: What Is a Good Cash on Cash Return?
There’s a lot more to owning a tiny house than the chance to save a great deal of money. It’s about simplicity, freedom, environmental responsibility, and enjoying life to the fullest while keeping to your value system. Living in a compact house may provide you with more money for life events or more time to engage in non-work pursuits.
Tiny houses provide many options for investors around the country. These are excellent prospects for repair, but they also make unique rental homes. While there are certain drawbacks to consider before starting, small home investments are gaining popularity in the business for a reason. With just 400 square feet, you may significantly contribute to your portfolio.
If you’re ready to start your journey with tiny homes for sale and turn them into rentals, Mashvisor offers all the tools you need.
To start using Mashvisor’s real estate investment tools, sign up for a 7-day free trial of today, followed by 15% off for life.