Photo Courtesy of Timbercraft Tiny Homes I recently started watching an HGTV show "Tiny
House Hunters". The houses are so charming but boy
are they expensive! I agree wholeheartedly in scaling
back...staying small so you can live large in other areas
of your life but I don't think it's a good idea to spend a
ton of money on a depreciating asset.
A Tiny House is like an RV, it is not real property. It becomes real property when you buy land and affix it to the land on a permanent foundation. My guess is that once you have purchased the land, the price tag for your Tiny House won't be so tiny depending on where you live. Seems to me like then you will have paid a lot of money for an extremely small house.
A Forbes article in 2014 on Tiny Houses that said the average tiny house costs between $200 to $400 square feet which is far pricier than the cost of an average home. In March of 2014 Zillow said the average California home was $268 per square foot, far less than you will pay for a tiny house and the California house will most likely appreciate over time, your tiny house on wheels will not.
House Hunters". The houses are so charming but boy
are they expensive! I agree wholeheartedly in scaling
back...staying small so you can live large in other areas
of your life but I don't think it's a good idea to spend a
ton of money on a depreciating asset.
A Tiny House is like an RV, it is not real property. It becomes real property when you buy land and affix it to the land on a permanent foundation. My guess is that once you have purchased the land, the price tag for your Tiny House won't be so tiny depending on where you live. Seems to me like then you will have paid a lot of money for an extremely small house.
A Forbes article in 2014 on Tiny Houses that said the average tiny house costs between $200 to $400 square feet which is far pricier than the cost of an average home. In March of 2014 Zillow said the average California home was $268 per square foot, far less than you will pay for a tiny house and the California house will most likely appreciate over time, your tiny house on wheels will not.
A smarter way to stay small so you can live large is to buy a 2-4 unit property and live in one of the units. You'll collect rent from the other units so your portion of the payment is small. You'll live in one of the units so your living space and expenses are small. But now you'll own an appreciating asset...something that will go up in value over time. Now you'll own an asset that will give you income in the form of rents from the other units. Now you'll own an asset that one day will be paid off, giving you a free place to live and income from the other units. Now you'll own a retirement vehicle not a recreational vehicle.
You Can buy an Owner Occupied 2-4 unit property With just 3.5% Down and It can be a gift from a relative.
This is probably far less than you need to buy a Tiny House which you might have to pay cash for or finance at a horrendous interest rate. You can buy a 2-4 unit property with 3.5% down on an FHA loan (if you have more money you can put more down and get a conventional loan) and you will also need closing costs which can be another 1-2% of the purchase price. But FHA has a way to build your closing costs into your rate...you take a slightly higher interest rate that gives you a rebate which you can use to pay your closing costs so it is easy to buy a 2-4 unit property even if you only have the 3.5% down. Oh, and the 3.5% down payment can be a gift from your parents or another relative.
I went on Tinyhouselending.com and found out that with a credit score of 680 you can pay anywhere from 5.99% to 32.99% to finance your Tiny House if you can't pay cash. Today average fixed rates on an FHA are in the low to high 3% range. Now in addition to the principle and interest payment on an FHA loan you have Mortgage Insurance and, on any real property you have Property Tax and Homeowner's Insurance. You will also have utilities on any type of house, tiny, medium or large.
Now...a good portion of your monthly payments on real property (not your tiny RV house) are tax deductible which saves you money on your income taxes (talk to your accountant). On your 2-4 unit property your tenants will be paying a good chunk of the payment for you. Overtime your property will be paid off (a healthy portion of it by your tenants) and over time your property should appreciate based on history.
I went on Tinyhouselending.com and found out that with a credit score of 680 you can pay anywhere from 5.99% to 32.99% to finance your Tiny House if you can't pay cash. Today average fixed rates on an FHA are in the low to high 3% range. Now in addition to the principle and interest payment on an FHA loan you have Mortgage Insurance and, on any real property you have Property Tax and Homeowner's Insurance. You will also have utilities on any type of house, tiny, medium or large.
Now...a good portion of your monthly payments on real property (not your tiny RV house) are tax deductible which saves you money on your income taxes (talk to your accountant). On your 2-4 unit property your tenants will be paying a good chunk of the payment for you. Overtime your property will be paid off (a healthy portion of it by your tenants) and over time your property should appreciate based on history.
Let's pretend your 2-4 property NEVER appreciates...
not Even one dime.
So you buy a 2-4 unit property for $450,000 and 30 years later it is still worth $450,000, but 30 years later:
1. Your mortgage is gone...thanks to your tenants and partly to you.
2. You are getting income from the other units.
3. You are living for free and making money as well.
4. And now you own an income producing asset worth $450,000
So stay small so you can live large in other areas of your life, but maybe not in an expensive, depreciating Tiny House.
1. Your mortgage is gone...thanks to your tenants and partly to you.
2. You are getting income from the other units.
3. You are living for free and making money as well.
4. And now you own an income producing asset worth $450,000
So stay small so you can live large in other areas of your life, but maybe not in an expensive, depreciating Tiny House.
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