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5 Questions to Ask Before Buying a Tiny House in Austin

Posted by Brad Pauly on Wednesday, February 26th, 2020 at 1:59pm.

Tiny home interior

The tiny house trend is sweeping the nation and making its mark in Austin. With land at a premium, some neighborhoods are making space for these smaller dwellings. While a tiny house's sticker price may be lower than some conventional homes, there are other issues to consider, including the resale value, lending options, and environmental impact. Many of the environmental benefits are real, but traditional homes can be updated with impactful green initiatives too.

That's why it's important to consult an expert like Pauly Presley Realty, before hopping on the bandwagon. A tiny house may not be a huge investment up front, but the return on investment might be lower than you think.

Here are 5 FAQs to consider before you buy a tiny house in Austin:

1. What is the True Cost of a Tiny House?

On the surface, a tiny house can cost less than a regular home. But some of the expenses can level out in the end. Most tiny homeowners have to rent storage units for extra belongings. And many have to outsource tasks they could do in a full-sized home. They pay extra for dry-cleaning and laundromats since they don't have space for ironing boards and washing machines. They pay extra to dine out since they can't accommodate multiple guests or cook an elaborate meal. They pay extra for office space or to the local barista, since they can't work on projects at home. They pay extra for entertainment since they feel the need to "get out of the house" more often than homeowners in larger living spaces. In short, tiny houses can often mean more spending, if you aren't committed to a true minimalist lifestyle. 

2. What Do You Actually Own with a Tiny House?

Unlike typical homes, and much like modular and mobile homes, some tiny house purchases don't include the land they're built on. In fact, you often have to pay additional monthly fees to "rent" the land. Land is what increases in value in Austin, so owning a tiny home but not the land is unadvisable as an investment. In addition, tiny houses eliminate economy of scale, in that larger structures are often easier to build and use less expensive equipment which makes tiny houses more expensive per square foot. Take a look at what you actually own in some of Austin's tiny house neighborhoods. If you don't own the land, you can be held hostage, as rental fees increase and your home's value stays the same or decreases. Heed the old saying, "a car loses value as soon as it drives off of the lot". Owning a tiny home, but not the land, is a similar "investment" to buying a car or boat (i.e., not a lasting investment).

  • Constellation ATX- This South Austin neighborhood sells "micro homes" starting at $90,000. But the price doesn't include the land, which rents for $725-$1,050 per month. Eighty homes are packed onto 6 acres of land, so that's a steep fee to rent such a small plot of land. 
  • Village Farm- This "agrihood" in East Austin touts sustainable living with eco-friendly construction like solar roofs and recycled materials. Homes range from $70,000-$140,000, in addition to a $600 monthly land rental fee. Homes average 399 square feet.
  • Pecan Meadow Village- 400 hundred homes ranging from $80,000-$120,000 and 200-400 square feet will fill this community in the Kyle area. Smaller than other tiny houses in Austin, these homes still require land rental fees. 
  • Manor Tiny Wildlife Resort- "Resort" may be a stretch, since many of these houses have no electrical or sewage hook-ups. But land rental fees still range from $350-$500 per month for these 16 lots near U.S. Highway 290 and State Highway 130.

3. Will a Tiny House Fit Your Lifestyle?

Do you have pets? Do you like to host friends? Do you have extended family? Do you plan to start a family? Do you get bored easily? There are a number of questions to ask yourself before taking the tiny house route. Industry experts liken tiny houses to high-end travel trailers and claim that most people don't live in them long term. While the ecological impact can be sustainable, the lifestyle often isn't. When your family grows, you'll have to move, but you may have a hard time selling the home. And often, tiny house owners don't live in them long enough to profit on the sale price, even if they find a buyer. This is another reason why it's important to own the land. If you outgrow the tiny house, you could build an addition, but not if you only rent the land.

Some tiny houses are on wheels, which adds mobility, but also other headaches. You can't just pull your house up anywhere you want in Austin, and zoning, regulations, and fees can be a hassle. Not to mention, the waste removal and upkeep of things that break when you're on the move is an unpleasant reality. That's why tiny houses should be treated as more of an accessory and less of a place of residence, if you aren't ready to fully embrace a minimalist lifestyle. 

4. What Are the Market Trends for Tiny Houses?

Tiny Homes are an unproven market and could be just a fad. TV shows lend the belief that interested buyers are plentiful, when really, supply outmatches demand. Tiny houses only appeal to a tiny demographic, which makes them a risky investment. Huge categories of buyers like families with kids, families with aging parents, and anyone with lots of "stuff" or a desire for space won't be interested in buying your house. Most lenders have a minimum square footage requirement, so you might have to pay cash for your tiny house and so will your potential buyer, which eliminates most of the remaining prospects.

While sustainable living will continue to become more important, tiny houses have a less promising outlook. Some people can carry a tiny purse or drive a Smart Car, but most people need a full-sized handbag and a sedan or SUV to support their lifestyle. Homes are no different. With tiny houses, you run the risk of floundering in a small market that fades on the fad.

5. What Are the Pros and Cons of a Tiny House?

Pros:

  • Sustainability
  • Simplified life
  • Reduced clutter
  • Reduced waste
  • Lower initial price
  • Some are mobile

Cons:

  • Cramped quarters
  • Limited lifestyle
  • Unexpected expenses
  • Lack of land ownership
  • Fleeting fad
  • Risky investment
  • Few lenders
  • Tough resale

Tiny House Alternatives to Consider

If you don't opt for a tiny house, that doesn't mean you're opting out of the advantages. In fact, most homes are amenable to simple changes that embrace the environmental consciousness of tiny dwellings. No matter where you live in Austin, you can reduce clutter, donate goods, and simplify your space. You can shrink your carbon footprint by limiting how often you run water, AC, and appliances. You can gain financial freedom by minimizing how often you dine, shop, and entertain outside of the home when you have sufficient interior space. Keep in mind that many utility bills like phone, cable, and wi-fi aren't based on square footage, so a tiny house only saves on certain utilities you can reduce in any home.

Look for builders that utilize eco-friendly roofing and windows and recycled materials. Seek out apartments or residences that occupy smaller pieces of land. And take a look at how you use your current space to see where improvements can be made.  If you take the tiny house mindset and apply it to a standard home, you get the best of both worlds. Could you bike to work? Could you rent out a bedroom? Could you downsize but still own the land? Is your home energy efficient? Do you compost? Do you have solar panels? Do you collect rainwater? Do you grow your own food? These green initiatives can have a significant impact on the environment, save money, and some can even be used for tax write-offs!

If you're interested in tiny houses, we're here to help. A home can be a great investment in Austin, particularly if you own the land. You might be the perfect candidate for tiny house living, and we'd love to show you the options. But, if you feel that it might be a squeeze, we have plenty of other homes to show you too. We're passionate about matching Austinites to their dream homes, and together we'll find the perfect fit. Consult the trusted professionals at Pauly Presley today to get started! 

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