It’s easy to get excited about the future when you’re planning on living in a tiny house. You look forward to saving a lot of money compared to buying an ordinary house, and depending on your vision, being free to travel with your whole life in tow behind you. It seems like the perfect way to broaden your horizons while doing something good for the world.
Can you afford it in the long run, though? Do tiny houses appreciate in value enough to be a worthwhile financial investment?
Do Tiny Houses Appreciate in Value?
The simple answer is yes… if you build your tiny house in the right place, and leave it there! Tiny houses are subject to real estate appreciation if you build them on a permanent foundation and let them be subject to local building codes and zoning ordinances while they become part of a growing community. That last part is critical. Your tiny house’s value depends on its community’s value.
Tiny houses that stay on wheels and are used frequently, however, are going to rapidly depreciate in value as they travel, just like any car.
When you buy a new car, the instant you drive off the dealership lot, it switches from being a “new” car to being a “used” one. It doesn’t matter that you’ve only used it for a few seconds. Its resale value will reflect that reality. And the more you use it, the lower that value. Your tiny house on wheels will fare no different.
So will your tiny house be an investment with a positive yield? That depends. Let’s take a look at what matters when it comes to the future value of your tiny house:
- The fundamental purpose of your tiny house
- Why mobile tiny houses lose value
- Why stationary tiny houses can increase in value
- What you can do to increase the resale value of either type of tiny house
- A careful evaluation: are the risks and rewards worth the efforts?
What Will You be Using Your Tiny House for?
It’s extremely important to make this distinction early in the planning process, before you start to build or buy your tiny house. Making the wrong choice could be a critical financial error. You need to have appropriate expectations for what your tiny house can be for you.
Many people are attracted to the nomadic possibilities of mobile tiny house living, and the way they can be combined with the tranquil and stable domesticity of a traditional house design. It’s much more than a case of wanting to have your cake and eat it, too; no, this is a legitimate combination of human needs.
We love to explore the world and be adventurous. We also love to have a familiar and comfortable place to retreat to when we need it. As a vehicle that both looks like and acts like a house, tiny houses can help us to fulfill both needs.
Other people love tiny houses because of how ecologically sensitive they can be. They look around at the industrial world of our modern society and are appalled by its excesses. They hate the idea of being wasteful and having to buy a house that cuts down more trees or excavates more minerals than necessary, just to create more space than they would ever need to occupy.
Still others think that tiny houses are an ingenious and cost-effective solution to many social ills such as homelessness or substandard and overcrowded public housing. As a building on a foundation, a tiny house can solve many problems.
In the middle of the dreams, though, we still live in a society that operates on economic laws. The value a tiny house provides must at least be equal or greater than the value of the resources used to build and use it. In some cases, that value is intangible; the sheer joy of travel and the security of homeownership. In other cases, the value is in whether you can recover or make more money than you put into the project after several years.
You have to decide ahead of time which of those values matters more to you. Only then can you make an informed decision, because some configurations will make it impossible to achieve your goal, and others are more likely to succeed.
Why Does a Mobile Tiny House Lose Value Over Time?
Tiny houses on wheels lose value quickly because they are subject to much of the same forces of wear and tear as any other vehicle.
Can you imagine the stress that even just a couple miles of ill-maintained highway would put on all the construction connections in a typical wood-frame house? Imagine living on top of a fault line that generates magnitude 4 earthquakes every day!
The fact of the matter is this: either your tiny house is designed to live on the road (meaning that it’s actually a Park Model RV; a vehicle rather than a building), or it has wheels just so that you can easily move it from the factory to its permanent home… once.
Those that stay put after that first trip are no longer subject to all the same destructive forces as the more mobile tiny homes. They’re no longer accumulating mileage and bumps and worn-out axles and tires. They just sit and enjoy the weather, so to speak.
The ones that stay on the road require just as much maintenance as any other highway-rated RV or travel trailer. The more miles you put under those wheels, the more likely you will start having to repair or replace parts.
The house structure will have been subject to repeated accelerations, deceleration, wind gusts, jolts from potholes, etc. The steel trailer itself will have also undergone all of these great stresses, gradually weakening it.
All of those forces and stresses and weaknesses result in the vehicle losing value because of the increased likelihood that it will require repairs. If you know you’re going to have to replace parts of it sooner to keep it in working order, you’re less inclined to pay the same price as when it was new.
The good news is that a tiny house that is built to Park Model RV standards and bears an RVIA certification seal is going to depreciate much slower than any other kind of wheeled tiny house.
RVIA-certified tiny homes are built to very specific industry standards like any other RV. They will still depreciate, of course. But a non-standard and uncertified tiny house is likely to be almost worthless from an appraisal standpoint as soon as you take it on the road.
Why Does a Stationary Tiny House Gain Value?
Built-in-place tiny houses generally gain value because they enjoy many of the same features as more traditional homes and other real estate. If they’re built in desirable locations with good access to a variety of services, like good schools, high-value-added businesses, and well-maintained utilities, they will tend to increase in value over time. That’s because of the competition that exists for a scarce commodity like land in a good location.
As the old saying goes, “buy land; they aren’t making any more of it!”
Real estate isn’t always that simple, though. Not all prices go up forever. For example, anyone who built or bought a house in central Detroit or inner Baltimore during the past seventy years or so has probably had a really rough time recouping the value of that investment. Demand for those neighborhoods generally fell off a cliff for most of that time.
Places like Detroit are now seeing rebounds and recoveries in some ways, but it just goes to show that nothing is guaranteed. Your tiny house will probably gain value if you put it in a good location. But you should always remember that conditions can change when you least expect them to.
The deeper point, too, is that it isn’t so much the house itself that has increased in value; it’s the value of the land underneath the house, considering the house as an improvement to that land.
Think about it- a chunk of land in a convenient city neighborhood is definitely going to have some potential value given the possibilities for what could be built there. By setting a tiny house down on it, you’ve instantly increased its value by making it easier for a person to live there.
And the more improvements you make to the land, such as growing a garden that makes the land both more productive and more beautiful, can add to that effect.
Likewise, the neighborhood matters. The more useful businesses and services there are nearby, the more opportunities that little chunk of land enjoys. That’s why Manhattan real estate is worth more than the New Jersey suburbs, and why Hollywood is more expensive than the Mojave Desert.
With that in mind, it needs to be pointed out that almost all tiny homes constitute a niche real estate market. When you want to sell one, you are extremely unlikely to have as many potentially interested buyers as you would for a more traditional house, regardless of location.
There is an exception to this, though. When a tiny house serves as an accessory dwelling unit, or ADU, on a normal residential property, it often makes that property much more attractive.
Either way, this is critically important: the house itself is still getting older while it sits there. The building will need maintenance, repairs, upgrades, and more work to keep it useful and valuable. There’s a reason some of those old houses in Detroit could be bought for just a dollar.
How Can I Increase My Tiny House’s Resale Value?
You can increase your tiny house’s resale value in the same ways you would do it for any other building or vehicle. For both, this means carrying out that regular upkeep, cleaning, repairs, painting, and all the other chores that maintain the tiny house and its appliances in top condition.
For a stationary house, it also means taking care of the surrounding property. In particular, you’ll want to make sure that all the utilities work well, and that the land is well-kept. Especially in rural areas, working gardens and farms can be quite valuable, along with other built improvements.
Importantly, a permanent tiny house that serves as an accessory dwelling unit on the same property as a more traditional house can be a major boost to the land value of the whole property. In some hot markets, that boost can increase the selling price by over 50%. ADUs provide urgently needed additional housing to the community in a flexible and attractive way.
A tiny house on wheels is going to depreciate, though, and there’s nothing you can do to stop it. You can slow it down a little bit by making sure that the wear and tear on the trailer is kept to a minimum. You also need to be extra vigilant about the structural engineering of the house itself, ensuring that things aren’t coming loose from bumps in the road.
Is it Worth it to Own a Tiny House?
Owning a tiny house is absolutely worth it as long as you get into it with clear expectations and understandings about what it will cost.
Some sources of advice and commentary will suggest that it isn’t worth it, but often, they’re looking at it from a purely financial perspective. As a permanent residence, it can often cost more per square foot to own a tiny house than a traditional one.
You therefore might not want to consider your tiny house a financial investment. But if the idea truly fits your values and your plans, then it can be an excellent investment in your happiness. We don’t advocate making dangerous financial decisions, because nothing ruins happiness like having money problems, but there’s more to life than money.
If you have the means, and the tiny house lifestyle appeals to you, then it can definitely be worthwhile.