Yahoo Finance Is a Tiny Home Worth It As a Rental Property?
Short-term rental properties can be a great source of passive income. But if you don’t already have a property to list on Airbnb or Vrbo, the price of buying or building one could be out of range, or destroy any chance of ever making a profit. There is hope. However, building a tiny home could be a viable solution. But tiny homes are not a one-size-fits-all solution, so their pros and cons should be thoroughly considered.
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How Big is a Tiny Home?
Compared to an average American home, a tiny home lives up to its name. In fact, while the average single-family home was 2,299 square feet as of 2022, tiny homes measure from 100 to 600 square feet. Most are 400 square feet or less. These homes are also often built on wheels so that they can be moved to new locations periodically.
How Much Does a Tiny Home Cost to Build?
A lot less square footage means a lot less building costs. In fact, according to Forbes.com, the average build cost of a 200-square-foot tiny home is $30,000. One double that size costs an average of $65,000. Compare that to the average cost, as of 2022, of building a single-family home in the U.S. of $311,000, according to HomeAdvisor.com. Importantly, these costs do not factor in the cost of land.
Other Costs to Consider
There are other costs to tiny homes, some unique, some not. For starters, unless you own property and have room for it, you need somewhere to put your tiny home. This means leasing or buying property. Additionally, tiny homes are not legal in every city and state, so make sure you research the laws in the area where you plan to keep your tiny home.
Related to this issue is the fact that while traditional homes, and their land, typically appreciate, a tiny home usually loses its value over time. So make sure the upkeep, and the rental income, will offset your loss in investment over time.
Fortunately, the utilities on a tiny home match its size. Costs of such things as electricity, water, and gas vary by location. However, these bills are typically a fraction of the cost of a normal-sized home. In fact, tiny homeowners report utility costs as low as $100 a month. You should also budget 1% of the home’s building cost per year for upkeep and maintenance.
Of course, your rental income from your tiny home will also be sized appropriately. Still, while it depends heavily on location, you might be surprised at the amount of nightly rent some tiny homeowners can charge. For instance, a quick glance at Airbnb’s tiny home page shows many tiny home rentals of well over $100 per night, some even crossing the $200 range. At that rate, recouping your initial investment and enjoying some outsized passive income might be closer than most believe.
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This article originally appeared on GOBankingRates.com: Is a Tiny Home Worth It As a Rental Property?
