Is a Tiny Home the Answer to Your Financial Woes?

Unlocking financial freedom by living small

Both my children are college graduates and married. And both share the belief that they will probably never be homeowners.

I get discouraged when they say that, but it is hard for me to assuage their bleak outlook on the American Dream. Have you seen home prices lately? Since the pandemic, the housing market has lost its mind.

Starter homes in areas like Phoenix, Denver, Austin, and Nashville start in the high $400,000 range. The shortage of starter homes continues to drive up prices. It is steadily pricing out many potential homeowners from entering into a long tradition of building equity and wealth through home ownership.

A crux in the housing crisis is the fact that homebuilders have not constructed enough affordable houses for them to purchase. Meanwhile, there are fewer existing homes available for sale. According to data from the US Census Bureau, in November 2022, not a single newly-built home sold in the US was under $200,000. — Business Insider

It’s not just young people that are wondering how to make homeownership manageable. This hits home (pardon the pun) for singles who can only rely on one income and retirees who are limited to a fixed income.

My husband and I learned during the recession and housing crisis of 07–08 that owning a home did not automatically guarantee one would build equity. We were caught off guard and lost quite a bit of money during that unfortunate time.

Even though banks and mortgage companies now have to follow more stringent and ethical practices when lending to homebuyers, the housing market has changed in a dramatic way that prohibits some from owning their own home, moving out of their starter homes, or downsizing and retiring into something more manageable.

A tiny home could be the answer to home ownership woes. However, even the tiny home market has kept pace with the overall housing market. But, for some, it may be the only affordable alternative to home ownership.

Here are a few reasons to consider a tiny home investment.

Low or no property taxes. We purchased a park model in a 55+ resort community. Not a “true” tiny home, at 880 square feet, we do have to pay real estate taxes. Being in a small mountain community, the taxes are a little more annually than my monthly truck payment.

This option was available to us for two reasons: we’re 55+, and I work remotely, so no need to be near a big city.

If you purchase a tiny home under 400 square feet, you generally do not have to pay real estate taxes because your home will fall into the category of an RV. However, if you place your home in a tiny home community, you will have to pay lot fees/rent (because you generally do not own your own lot, however, in my community we do, which is rare).

You will also have to pay for amenities such as garbage, sewer, and any recreational resources such as a pool or community area. Still, these fees will be considerably less than rent for a decent apartment in most communities.

And you own your own home, so you are investing. Unlike an RV/camper which loses value over time, a tiny home, or park model, does appreciate in value — especially if you take care of it and keep up with basic maintenance.

Minimal association fees. Many traditional neighborhoods, even those without community pools have homeowner associations and the costs can add hundreds of dollars to your mortgage payment each month.

In tiny home communities, the association fees are usually incorporated into the monthly lease on your lot. You get all the amenities of the community plus garbage, sewer, and road maintenance for one price.

If you find a great community, you can score huge with the potential for workout facilities, pool and sauna, community gardens, coffee shops on site, and much more! We found everything we wanted in our community and that’s why we decided to put down roots here.

Lower utility bills. It goes without saying that a smaller house means a smaller utility bill.

More affordable upkeep and renovation. With fewer rooms and smaller square footage, any updates you do in your home will be a fraction of what a larger home would incur. You’ll also spend less time and cash on yard maintenance. Less furniture, minimal yard maintenance, and simpler remodeling needs equal more time and money for you to spend on your dreams and adventures.

Amenities within walking distance. Here is where you might have to search a bit as we found some tiny home communities sorely lacking in amenities. Part of the allure of this type of neighborhood for us was that we could walk or bike to resources like workout facilities, pool, food trucks, concerts, and other community events.

It’s a healthier lifestyle; we get to know all our neighbors and drive less, saving money on gas too. We even have a lake within walking distance, so fishing, swimming, and kayaking are regularly on the agenda.

Tiny homes are still a strong investment in the right location. We wanted to live in Arizona, but with Phoenix housing prices rising, we decided we didn’t need that kind of debt as we were heading into retirement. We opted for a park model in an RV resort. Even tucked away in the mountains, these small homes have doubled and almost tripled in value in the last five years. Living affordably while building equity is a win-win.

In today’s challenging housing market, where the American Dream of home ownership seems increasingly elusive, the prospect of tiny homes emerges as a beacon of hope for many. The soaring property prices and the dearth of affordable housing options have pushed countless individuals and families to reevaluate their housing choices.

While the tiny home market has also experienced growth, it remains a potentially affordable alternative to traditional homeownership. With benefits such as reduced property taxes, minimal association fees, lower utility bills, and proximity to amenities, tiny homes offer a path to financial sustainability and freedom.

By opting for a tiny home, individuals can make a sound investment in their future while simplifying their lives and focusing on their dreams and pursuits.

Living small is part of Mary’s plan for simplifying her life. You can read more about her journey from chaos and clutter to contentment and peace by following her publication, The Decluttered Soul.