Tiny Houses May Not be for Me

Tiny Houses- a very cool alternative housing option that I admire but may never be a part of. Here's why:

I have been thinking about the growth of the Tiny House movement worldwide. This movement seems to be popular with some in the FIRE community, and the mostly younger participants seeking an alternative to traditional home ownership. 


Tiny Houses:

Tiny houses have been all over the news over the last few years. The stories I see on YouTube and read about typically follow a common pattern: Young couple seeking to downsize and reduce their cubicle time by building and moving into a small home built on an 18 – 24 foot trailer. The tiny house allows them to travel and avoid the trap of consumerism that seems to be paired with owning a larger residence. Most specifically the tiny house owners are more interested in having the freedom awarded when you are not tied to an expensive mortgage or rent.


Tiny House great intentions:

The motivation to live in a tiny house makes sense for a lot of young people. Who wouldn’t want more time away from the office cubicle to see the national parks and wildlife views of the world. As someone who enjoys building wealth to obtain freedom, safety and general calm state of mind, here are few items that I can't seem to reconcile regarding Tiny House ownership.


(i) Tiny House Portability downsides:

Yes, having a 24 trailer will allow you to bring your custom-built home anywhere that can store it. However, moving a tiny house and setting up a new part-time or near full-time campsite/residence looks like a chore and exercise that must be taken seriously. My point here is that setting up camp is fun when you go camping, but having to setup, breakdown and re-setup camp on an on-going basis is not where I want to put my efforts. Pulling and relocating a twenty-four foot trailer requires careful planning and setup. Also, unlike motor homes, tiny houses are not typically optimized for long travel, they seem to be designed to stay in one place for long periods of time. 


Senior Citizens:

Much of the drive for tiny houses also seems at odds with an aging population. Can you imagine scenario where senior citizens need to relocate their trailer residence? I simply can't imagine being a senior citizen living in a portable home with all of the maintenance and upkeep required. Please let me know if I am missing something here. 


(ii) Tiny House Cost Benefits:

Yes, building your own tiny house will certainly be cheaper than building a full scale single family home. However, I've read that the cost per square foot to build a tiny house is actually quite high, as you are not benefiting from the economies of scale production associated with a 2,000 square foot house build. Also, a tiny house will require a smaller but customized construction build, so the smaller build savings could be eaten up by custom built cabinets, counter tops, windows and doors, etc. 

From what I understand, tiny houses do not appreciate much in value, they actually depreciate through use and travel. So, perhaps your saving's achieved in building a $50,000 dollar portable home may not help you to build future asset value- I would think hard about this fact and run the numbers before embarking on a tiny house build. 


(iii) Tiny House Lack of Land ownership:

In my opinion the benefit of portability is severely hindered by the type of land usage and site location of your tiny home. I've read about tiny house owners who buy their own rural property and build out their perfect homestead. As ideal as these pictures look, I am wondering if the purchase of rural land is a good long-term investment versus purchasing a traditional home in a more populated area. Long term, lots and/or smaller homes in traditional residential areas will likely gain value over time. 

I don't know if an isolated rural plot to keep your tiny house will gain value time. Perhaps I am missing the point of tiny houses, but it seems like borrowing money and maintaining a mortgage on a property that may not have future value above the amount you put into may not be the right approach to property ownership.


Tiny House Rental, side yard borrowing or family generosity. 

Another common theme I read about regarding the sites used to store a tiny house involves the tiny house residence renting a side yard from a friend's residential or rural property, or in some scenarios setting up a tiny house on their parent's side yard or back lot. Now, renting a property or side yard for your tiny house doesn't seem to fit the freedom motivations associated with getting into tiny houses. When you rent your neighbors side yard to put your tiny house, you are now tied into a landlord/tenant relationship that leaves you no actual control. 


What if your landlord Dies:

For instance, what if your landlord friend whom you've known for years dies, and his kids or other entities who inherit the property want nothing to do with your cool looking tiny house on their recently inherited property. Unless there are very clear legal ownership provisions that provide you your side yard rental, you may be moving your tiny house to another location at your full cost.

This is the key problem I have with rental spaces for tiny houses. You don't have full control of your location long term, with the only option in your control being an exit of the property to another location- this limitation itself would move me to own my own property before considering a tiny house build.


The family land scenario:

I have read about tiny house owners who opt to utilize their family property to semi- permanently store their tiny house. Although this family property option is certainly not available to everyone, it could be a good way to leverage your family property, but only short term. The problem here is that you are now reliant on your family for space- how is this different from living in your parent's basement. You don't own the land, and you're specifically not building your own wealth.


Future value of your family's property:

Given the scenario of keeping your tiny house on your parent's land, consider these two bad family/financial scenarios:


-(i) Your parents pass on, and you learn that their estate is essentially insolvent. You then need to move off the family property and now the years of memories and great experiences on your parent's family lot are all that you have after the creditors sell off your family land. In a worst case scenario, you never worked to obtain additional property ownership, as you considered your family land to part your land, part your parent's land- clearly this scenario puts you last in line for obtaining your tiny house site location. 


-(ii) Your parents pass on, and you enter into a family dispute with your siblings. One sibling is fine with your tiny house on the lot, another sibling wants it off the property so the land can be sold. Working probate issues with family members can be messy, and if you have been living on your parent's lot rent free from years, you may be the recipient of bad feelings from your siblings. In the scenario of five siblings/heirs with equal estate ownership, your tiny house may not be a priority for all parties involved, and without your own money to back you up, your voting on the matter holds only a 20% stake in the future decision of the property.

In both of these above scenarios you are relying on others, which works against my general approach to obtain financial freedom and self-reliance. I don't ever want to rely on others to provide my housing when I can work hard to obtain my own residence.


Not All bad news for tiny houses:

My above scenarios seem pretty bad, but If haven't discouraged you completely, you can certainly do a few things to at least mitigate the risk of these scenarios:


a- buy your own land for your tiny house, it's yours, and once you pay off the loan no own in your family can take it from you.


b- in a family land scenario, write in clear living will or trust provisions with your siblings to allow you to at least buy out your siblings, or split the future estate with your tiny house factored in.


c- run a full set of financial scenarios for the building and storing of your tiny house. Give thought to how many years you plan to keep the tiny house as your primary residence. Perhaps consider renting out the tiny house if you decide to move back into traditional home ownership.


Just my opinions:

Again, these opinions are my own. Please feel free to set me straight via email at (money@financialsombrero.com) if I am completely missing the point on benefits and risks of tiny houses. 


Financial Sombrero



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Note that I am not a financial or legal professional, nor am I licensed to sell securities, or any other financial instruments. Given this statement, I strongly recommend that you consider this blog as entertainment value. Although, I sincerely hope that I can motivate you to learn to build your own financial knowledge and wealth.