The tiny home movement is in full swing and is particularly popular among older adults looking to downsize. Approximately 40% of tiny homeowners are 50 or older, and 55% are women.
That doesn’t mean tiny house living is strictly a move for retirees, of course. You can downsize to a tiny home at any stage of your life. Whether you want to plan for retirement purposefully or simply want to start enjoying life now, here’s a look at how tiny house living might fit into your plans.
Initial Costs
The cost to purchase a tiny home depends on the route you take. In other words, it hinges on a variety of factors, such as those listed below:
Purchase Options
Some typical building and purchase options for tiny house living are as follows:
Custom Builds
You’ll want a custom build for a home made just for you. The first step involves finding an experienced builder willing to take on your project. From there, you’ll need to create many design choices, including what finishes and materials you intend to incorporate into your build.
The full range of costs for a tiny home build goes from $4,000 to $180,000. Be that as it may, the total costs for most tiny houses fall between $30,000 and $60,000. You’ll need to collaborate with your builder to identify cost-saving opportunities without compromising on what’s most important to you.
For example, if you want your tiny home to be energy-independent, you’ll need a modern design with solar panels and built-in battery storage.
Pre-Built Homes
Prefabricated homes can save you time and money, with some options going for as low as a few thousand dollars. Pre-assembled tiny houses can be delivered directly to your chosen site, but it’s essential to keep in mind that the cheapest options often arrive in kits. You’ll need to hire someone to assemble them fully. Be sure to check and see if your tiny home has to be assembled.
DIY
If you have the necessary time and patience, and a knack for carpentry, you may be able to build your own tiny home. Just remember that you’ll need to build your structure following state and local codes so that you can get insurance on your home.
Land Considerations
A tiny house is only part of the financial equation. You also need somewhere to put it. Land can be a significant expense, whether you buy or rent it. Owning a plot of land gives you long-term stability but adds to the costs you’ll need to cover upfront. Renting space in a tiny house community is usually cheaper, but it may come with restrictions like monthly fees or shared amenities.
Other aspects to keep in mind include the following:
Utility Setup Costs
When you buy land, you’ll also need to run utilities. Connecting to city utilities can be pretty costly, especially if your home is far from the nearest utility pole. You’ll also need to pay for a water line from the city junction to your property.
You’ll have to invest in a well if you place your home in a rural area without public utilities. The average cost to drill a well ranges from $5,000 to $10,000. You’ll also have to pay for a pump and may want to add a water softener or purification system.
Site Preparation Expenses
Even the perfect plot of land can need some work. A contractor might have to level the area, add a foundation, or install utility hookups. Ask around for quotes so you can accurately account for site prep.
At the same time, don’t let these expenses discourage you. Just make sure you have an accurate accounting of all costs to avoid surprises when buying or building your tiny home.
Ongoing Financial Benefits
If you want to achieve financial freedom, two main paths are available: earning more or decreasing your monthly expenses. While polywork (working two jobs) may work for some people, it may not be a strategy that aligns with the vision you have for yourself.
Thankfully, tiny house living could help you avoid overworking yourself by providing the following financial benefits:
Reduced Monthly Expenses
High mortgage payments are among the biggest factors keeping people in financial straits. A tiny house has a much smaller (or non-existent) payment and lower utility bills, as you’ll be heating and cooling a smaller space.
You can also maximize your monthly savings by choosing cheap and easy dinners. Since you won’t have much room for storage or a big, elaborate kitchen, simplifying your cooking routine while you downsize is a wise idea.
Other ways in which you’ll enjoy lower monthly expenditures include the following:
Minimal Maintenance
By transitioning to a tiny home, you can reduce interior cleaning and exterior maintenance. The decreased square footage means less time being put aside to care for your home, and you’ll spend less on repairs, too. All of those savings can quickly add up.
Reduced Property Taxes
Since your tiny home will be less valuable than a traditional home, you’ll pay less in property taxes. Depending on where you live and the design of your tiny house, you may be exempt from property taxes altogether. For example, some states classify tiny homes on wheels as RVs or mobile structures.
Potential for Debt-Free Living
As explained earlier, downsizing to a tiny home can reduce or eliminate your mortgage payment. But alongside that, you may be able to use the proceeds from the sale of your primary residence to eliminate other debts, such as credit card and vehicle payments.
Similarly, if you receive a lump sum payment upon retirement, you could allocate some of your funds to pay cash for a tiny house. This strategy eliminates the stress of paying monthly housing bills.
Added Support
Tiny home living can be a great option if you or a loved one are experiencing cognitive decline and need to remain in close proximity to loved ones who can help care for you. Similarly, if you need to care for an elderly relative, investing in a tiny home can be more cost-effective and give you peace of mind that your loved one is receiving adequate support.
Hidden Costs and Challenges
Some hurdles you may encounter as you transition to tiny home living include the following:
Zoning
Local zoning laws limit what types of structures you are allowed to put on a property, and they can be broken down into the following components:
- Permit Requirements: These vary by home, representing an added cost and potentially leading to project delays
- Building Codes: You might need to modify your home to comply with local housing laws
- Legal Fees: Consulting with an experienced real estate attorney can ensure you’re following all regulations, but it can add to your upfront costs
Let’s say you want to put a tiny home on a relative’s land, but local zoning laws only allow for one residence. In this case, you must seek special approval and hope that the city or county grants your request.
Insurance
Insuring a tiny house can be tricky, as many insurers don’t offer traditional homeowners’ policies for tiny homes, especially if they’re mobile. You may need a specialized RV or custom insurance policy, which could cost more than expected.
Storage
Living tiny means downsizing your possessions, and though that may sound simple, you might realize that you have a lot more sentimental or essential belongings than you are willing to part with. You may need to rent a storage unit for these items. Alternatively, if you place your tiny home on land you own, you could invest in a shed instead.
Lifestyle Financial Impacts
Tiny house living requires a complete lifestyle change. With that in mind, there are some financial implications to consider when shifting your life around small-scale living, such as:
Entertainment and Social Activities
You probably won’t want to host many parties at your tiny home. As such, you may spend more money on dining out or entertaining in other ways.
Shopping Habits
Tiny living forces you to rethink every purchase. Impulse buys, and bulk shopping trips will likely become a thing of the past since you simply lack the extra space.
Travel and Mobility Costs
If your tiny home is mobile and you plan to move between different RV communities, your budget must account for fuel costs, vehicle maintenance, and potential campground fees.
Work-From-Home Considerations
Though working from home in a tiny house is possible, you’ll want to invest in compact office furniture and excellent Wi-Fi. You may also need noise-canceling headphones to create a functional workspace and block out any distractions.
Long-Term Financial Considerations
In addition to your day-to-day lifestyle, you must be aware of the long-term financial implications of your tiny home adventure.
Much like vehicles or RVs, tiny homes often depreciate, which means they aren’t necessarily the best investment tool. If you plan to sell your tiny house down the road, you might not recoup your initial investment.
However, tiny homes can free up cash you can allocate toward other investments, such as stocks or retirement accounts.
Counting the Costs of Tiny House Living
Deciding to go tiny isn’t just about loving the minimalist vibe. You also need to ensure the move works for your wallet and lifestyle. Start with a cost-benefit analysis. Add up the costs of buying or building your tiny home, including land, utilities, and potential hidden expenses. Then, compare that to how much you’ll save on rent, utilities, and maintenance.
Next, think about your personal financial goals. Whether you’re hoping to save for retirement, travel more, or live debt-free, a shift to tiny living can help, but it needs to align with your bigger picture.
Finally, consider your timeline. Be realistic, but don’t wait until the last minute. Otherwise, you may have to scramble to find a contractor, buy land, and achieve your downsizing goals.
Is a Tiny Home Right for You?
Whether you’re drawn to the idea of financial living or simply love the charm of a cozy space, tiny living could be the right move. Scaling down and reducing or eliminating your mortgage payments can be an excellent means to prepare for retirement and break a generational debt cycle.
Still, buying any home, even a tiny one, is a substantial decision that shouldn’t be taken lightly. With that in mind, you should consult with a financial adviser and your loved ones to properly determine whether a tiny home is best for you.
