If you’ve been keeping up with real estate trends, you might have heard about tiny homes. The Tiny House Movement has grown to big heights in recent years. As a result, many real estate investors are wondering if they should buy a tiny house for investment. Is investing in a tiny house a good idea? If so, what are the tiny house friendly states in 2020? Keep reading this blog post to find out!
What Is a Tiny House?
For starters, what exactly is a tiny house? According to The Tiny Life, a tiny house is a home that is between 100 and 400 square feet. The average US investment property, on the other hand, is about 2,600 square feet. The idea behind tiny houses is to downsize to a simpler lifestyle in affordable housing. As a result, tiny homes implement open floor plans, large windows, high ceilings, and hyper-efficient design. While the concept emerged in the 1990s, tiny houses have increased in popularity after the most recent housing crisis. With sharp rises in foreclosures and unaffordability, buying a tiny house has become a popular trend in the US housing market.
Why Should You Invest in a Tiny House?
As mentioned, tiny homes have taken off as the next trendy thing in real estate, and for good reason. Let’s look at four of the reasons why buying and renting out a tiny house is worth it.
1. Affordability
It’s no secret that the US housing market is expensive. After all, about 37% of the average American’s salary goes to housing. Investing in a tiny house, however, bucks this pricey trend. The cost of tiny homes ranges from $10,000 to $40,000, which is a far cry from the median US property price. Obviously, tiny homes are significantly cheaper due to their small square footage. Nonetheless, they are an affordable alternative real estate investment to both those interested in investing and those who are experienced.
Related: Invest in the 5 Cheapest Housing Markets in 2020
2. Rental Strategy Versatility
Tiny homes are renowned for their rental strategy versatility. They can work as both traditional and Airbnb rental properties. Like any other type of traditional rental, tiny homes can generate high and long-term rental income. However, there is a caveat with tiny homes that other traditional properties lack, and that is their tenant pool. Single-family homes, for instance, are in demand by all types of tenants, such as families, young adults, students, or workers. The same is not true for tiny homes. Therefore, you need to strongly consider the tenant base of your location before investing in a tiny house.
Due to the tenant pool limitation of traditional tiny houses, Airbnb is usually the better rental strategy for these unique investment properties. Many tourists, particularly millennials, are tired of traditional short-term dwellings, like hotels. As a result, they seek out those that provide more unique experiences, like RVs, cabins, and of course, tiny homes. Depending on the location, an Airbnb tiny house can be a money-making machine. It goes without saying, however, that real estate investors need to be aware of the short-term rental laws in the given area.
Search for a tiny home now that would be profitable as an Airbnb rental property.
3. Simple Rental Property Management
The small size of tiny house listings yields another benefit- easy management. Maintaining, cleaning, and renovating is much simpler in tiny houses than other real estate properties. As a result, self-management becomes the most convenient management option available. You’ll save big by not hiring a professional property manager. In addition, tiny homes conserve energy and are cost-efficient. This translates to savings on utility bills, such as electricity and heating.
Related: Residential Rental Property Management: Here’s How to Do It Yourself
4. High ROI Potential
Finally, you should buy a tiny house because of its profitability. Its affordability, rental versatility, and easy management allow real estate investors to earn and save big from these small investment properties. Since they are relatively affordable, investors can generate a high return on investment (ROI) by purchasing multiple tiny homes. By doing so in the best tiny house friendly states, investors will be in for the consistent and high return on investment.
What Are the Most Tiny House Friendly States?
There’s no doubt that tiny homes are lucrative real estate investments. However, investors may get a case of tiny house regret if they don’t research their location’s tiny house regulations beforehand. For example, a real estate investor may buy a tiny house, but will not be able to rent it out if the city’s tiny house zoning regulations prohibit rental activity in tiny homes. According to the national coordinator for the Tiny House Association, “there are only a handful of cities across the country that directly address tiny houses”. That begs the question, what states are tiny house friendly? Based on their tiny house regulations, California, Colorado, Florida, and Texas are the best tiny house friendly states.
1. California
According to Curbed, California is one of the most tiny house friendly states. Currently, two areas, Fresno and Ojai have tiny house regulations that permit tiny houses on wheels, such as RVs, as backyard cottages without a “caregiver dwelling” requirement. This requirement states that tiny houses on wheels are only allowed in the backyard of people needing assistance. It is instated in the counties of Alameda, Contra Costa, Lake, Mendocino, Napa, Sacramento, and Sonoma.
2. Colorado
Two towns in the Colorado real estate market have been open to tiny homes for years now. Walsenburg was the first town in the state to put in place tiny house zoning regulations for properties between 120 and 600 square feet. One year later, Durango, a mountain town on the New Mexico border, passed an ordinance to allow ADUs (accessory dwelling units) in six neighborhoods.
3. Florida
Rockledge, Florida is home to some of the most coherent tiny house regulations in the US. Tiny house size regulations allow properties between 150 and 700 square feet in Pocket Neighborhood, Rockledge’s tiny house community. The city’s tiny house ordinance also distinguishes between tiny houses and tiny houses on wheels within two zoning districts.
4. Texas
Last, but not least, is the Lone Star State. Texas is home to Spur, the tiny house capital of the US. Spur lacks any building restrictions, which has attracted a community of tiny house investors. The state’s capital, Austin, and Fort Worth are also open to ADUs, as long as they follow city code.
Read our Austin real estate market report to learn more about this top location.
What Is the Best Way to Find Tiny Houses for Sale?
After reading this blog, we’re sure that you want to start searching for tiny houses for sale. So, where should you go for help? Look no further! With Mashvisor’s investment property search engine, you can find out where to buy a tiny house by searching through and analyzing any desired neighborhood in the US! Also, you can enter the address of any tiny house for sale into our real estate database and use Mashvisor’s investment property calculator to analyze it!
Related: The Best Investment Property Search Engine 2020
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