07/19 The Cost of Renting vs. Buying a Tiny Home

tiny house on a foundation in the countryAfter watching a recent documentary on tiny house living, Las Vegas native Paul Wolford decided to ditch his big house and substantially downsize. “In our house, we used maybe one or two rooms. We had a lot of wasted space,” he said. “We realized we didn’t want all of the clutter and useless things.”

Wolford is far from alone. Tiny houses — typically 400 square feet in size or less — have popped up around the country over the last decade, as more people choose to opt out of the increasingly expensive traditional U.S. housing market.

If you’re one of the growing number of people interested in tiny house living, you can weigh a number of factors to help you decide whether renting a tiny home or buying one makes the most sense. Here are some of the most important details so you can easily compare the options.

1. The Long-Term Cost
As with any rent-versus-buy scenario, the favorable outcome depends on many factors, including how long you plan to live in the property, costs in your local area and expected increases in real estate values and rental rates.

“Whether one is buying a tiny home or a mansion, markets can price them very differently, depending on rental sales and demand,” said David Reiss, professor of law and research director at the Center for Urban Business Entrepreneurship. You might find a better deal on a tiny house, “if rental units are priced differently from owned units in terms of their monthly cost,” he added.

Unlike traditional houses, which are far more likely to be built by a professional contractor, many tiny homes are constructed by avid do-it-yourselfers. New, finished tiny homes range in price from about $45,000 to $80,000, according to Tiny House Community. A DIY-er, meanwhile, can avoid labor costs and shave $20,000 or more off the home’s overall cost.

That’s exactly how Wolford cut construction costs when he left his 1,600-square-foot Las Vegas home to build a 350-square-foot house in West Jordan, Utah. “Electrical, plumbing and our gas systems were pretty expensive. I did the work on these myself, which helped save a lot of money,” he said. He also accepted a donated building shell and used local classifieds listings to source double-pane windows, doors, cabinets, a vanity, sink and a bath tub — all for $400.

All told, Wolford spent $21,000, which breaks out to $14,000 for construction materials and appliance costs — his composting toilet alone was a $1,000 expense — and then an additional $7,000 for a custom-made trailer, which acts as the tiny home’s foundation. The trailer cost “was way over what I had planned and budgeted,” he said, “but it is vitally important to the overall structure’s stability and strength.”

The lesson: Even though there are many ways to cut costs, particularly for those who can do a lot of the work themselves, unexpectedly large costs can crop up.

2. The Monthly Cost
Even for those who pay construction fees out-of-pocket, the monthly costs associated with tiny house living can vary dramatically. You have to decide whether you’ll pay a monthly mortgage payment for a land loan, rent space off the books or buy a plot within one of several tiny house communities cropping up across the nation. Each decision affects your overall monthly expense. Land owners are subject to property taxes, which can be radically different from one municipality to another.

Wolford pays $400 per month to a friend in exchange for keeping his tiny house parked on his lot. He also financed the trailer on which his house sits, which costs an additional $200 per month.

Then, for those without upfront capital, there’s the financing charge. Mortgages are hard to obtain for homes under 600 square feet and for those that cost less than $50,000, according to Tiny House Community. Available financing options — which include loans from tiny house builders, certified RV loans for tiny homes on wheels and credit cards — can be much pricier than traditional home financing options.

Long-term tiny houses for rent can be found for much less per month, but they can also be difficult to locate. Some are listed on tiny home rental and purchase site Tiny House Listings. Although prices ranged at publishing time from a low of $320 per month to a high of $1,635, most were priced around $500 per month.

But that’s the cost for long-term rentals. Renting a tiny home by the night through a site like Airbnb or through a tiny house village can cost substantially more. Mt. Hood Tiny House Village rentals in Mt. Hood, Ore., which are all less than 300 square feet, can reach as high as $139 per night, making short-term rentals a better option for vacationers or for those who want to test drive tiny house living before committing to it for the long term.

Read more – https://www.gobankingrates.com/mortgage-rates/cost-renting-vs-buying-tiny-home/

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Elaine Walker