Jessica Morgan McAtee
Keeping Tiny Affordable
Updated: Dec 6, 2020
Most people who go Tiny primarily do it for financial reasons.
Living in a Tiny Home (TH) is a great way to lower expenses and dip out of the 9-5 grind, or at least lessen certain monthly bills . Many tiny house owners have no credit card debt and most have bigger savings accounts than the typical homeowner.
Land price and towing are costs that should be considered. Figuring out the detailed finances of your situation is critical.
Some people really despise financial management and budgeting. We realize it’s not always fun to crunch the numbers but it greatly determines our possibilities and options.
We are financial geeks and the last thing we want a Tiny House to be is another oppressive ball and chain to the owners.
Because of that, we recommend no debt, or as little as possible when obtaining yours. If a plan is not in place, owning a TH can cost as much as a full-size home!
At the very least, we recommend a savings plan ahead of time or a payoff plan so that this home truly makes you free and isn’t a headache.
One fantastic thing about Tiny Houses is that they don’t require anywhere near the amount of money that traditional homes do. According to census data, the average sale price of a new American home in 2019 was $383,900!
How much do they cost?
From our experience and research, it seems the absolute cheapest livable Tiny Houses on Wheels cost around $10,000. This can (barely) be obtained if you build it yourself and maintain a painstakingly strict budget. It will also require using handouts and recycled materials and hopefully a buddy or two to help. It’s tight but we have seen it done.
Be prepared for construction to cost more than you initially expect. Originally, we hoped to build ours, on our own, for $10K. But, realistically, we were not able to find used materials that were what we needed, starting with the trailer. Additionally, I wasn’t willing to compromise on certain elements and that ended up costing us more. At the end of the day our cost was $17.5K including appliances but excluding furnishings other than built-ins. That may not sound like much, but it was 75% more than our original and desired estimate! We left space in our budget so this didn't bust the bank.
But, building one yourself requires design and building skills that most of us don’t have. If you do have those, you are ahead of the game.
If not, don’t panic, there are other options.
Perhaps you don’t have the ability to design, engineer or physically build your Tiny Home. If you are not doing the building yourself, you will be paying more to compensate the designer/builder. From our experience, a new Tiny House can cost anywhere upwards of about $40,000. Some high-end ones are as much as $125K, which is enough to buy a traditional home in some places. They are usually custom made and beautiful.
There are some used Tiny Homes on Wheels (THOW) for sale too. If we had not had the resources to build ours on our own, this would have been our next choice. They start around $30K. Used THOWs for sale can be found online like any other RV.
Building or purchasing your TH is only part of the equation. Where you will plop it is another thing altogether. We opted to purchase land for ours.
Some people rent permanent space for theirs.
Others travel constantly and find parks or communities that rent to TH folks.
The land cost is an expense that must be considered.
If you don’t have immediate access to the amount you need there are still some options.
It can be hard to obtain a mortgage on a Tiny House on Wheels because banks see them as Recreational Vehicles. Additionally, traditional loans often have minimum square footage requirements. Traditional loans are generally secured with land, and since most Tiny Homes are on wheels, there is no land. You may have to get creative.
One fellow built his Tiny House on a credit card with no interest for the first 2 years. Of course, this requires good credit and a credit line that can sufficiently cover your costs. We only recommend it if you are certain to pay it off immediately, rather than accrue interest, which would effectively raise the price you pay until it is paid off.
With decent credit, you may be able to take out an unsecured bank loan to help cover your costs.
If you own a home, and are building a Tiny House for a vacation home, or to downsize to a new life, you may be able to take out a Home Equity Line of Credit (HELOC). You can build your TH with the loan and if you are downsizing, you can pay it off when the big home sells.
If you buy a THOW from a Tiny House company and have one custom built, they may offer a financing plan. Many of them have teamed up with banks for this reason. They lend to folks with good credit because there is no collateral on the loan. The mortgages are as long as 15 years.
Rumor has it that Fannie Mae and Freddie Mac are considering pilot programs that will finance Tiny Homes. Beginning in 2018, there is a Tiny House section in the International Residential Code (IRC). Which, in theory, means that financing is easier to get, but most lenders aren’t on the bandwagon yet. It appears this benefit may only apply to Tiny Homes on foundations, not those on wheels, which is the bulk of them.
Make a Savings Plan
With Tiny Living, everything can be scaled down and simplified. Even if you are broke, or in debt, you can start moving in the right direction today with a financial plan in action.
With even a small income, you can begin stashing your cash.
You may not be ready to begin building just yet, but you can give your finances a tune-up in the meanwhile so that once you are ready to take the next step you have more cash on hand to do so. Working on your finances behind the scenes and before you take the next step is arguably one of the most significant actions you can take to prepare yourself for Tiny Life.
Of course, you are completely free and entitled to disagree.
We saved fiercely for several years before building ours. A TH was only a small piece of our over-all financial strategy. We created a detailed plan and even made a chart measuring our progress that we hung on the fridge for motivation. We knew the amount we needed to have saved before we set sail and so we worked it backwards. We calculated the amount we needed and divided that by how much we were saving every week.
The total of weeks was more than two years, but we put our minds to it and stayed positive. Every week, we colored in another mark on our fridge chart. This kept us focused during a time when we were exhausted, working long hours and saving every extra dime we came across.
We ruthlessly saved money and cut all expenses, the latter being what we believe to be the most important. Usually, people can curtail excess spending habits much faster (almost instantly) than they can increase their income. If you can do both, that is even better.
Our money plan was intense, and admittedly not for everyone, but we wanted MORE THAN ANYTHING to quit our full-time jobs, live debt free and have a Tiny House to spend summers in the Pacific North West.
Your journey and results will not be identical to ours. We accomplished our goal faster than we had anticipated by doing a number of crazy-money-hacks, some of which are listed below:
· Obtained house mates to help lower our cost of living for a set time.
· Changed our cell phone plan providers to Airvoice Wireless and Republic, which brought our monthly total to less than $40 combined!
· Did without all recurring expenses that weren’t necessary like cable tv, lawn service, cleaning crew, Netflix, subscriptions, gym memberships, etc. We kept the internet, water bill and electricity bill.
· Shopped for groceries at discount stores like Aldi or Grocery Outlet and only had one meat meal a week, the rest were vegetarian or vegan.
· Instead of going out for entertainment (movies, restaurants, expensive festivals, escape rooms, sporting events, etc.), we visit free parks & museums, the beach, make art, exercise outdoors, brainstorm more ways to save, invite friends over or have game night or dinner parties at home.
· We raised all insurance deductibles (health, auto, homeowners, etc.) and shopped out the best plans every year at renewal to keep our premiums low.
· We exercise at home or outdoors without expensive equipment or classes. YouTube videos are my favorite workouts!
· We both began earning extra money on top of our full-time jobs. They included writing courses in our areas of expertise, tutoring online, renting out a room, picking up gigs on the side, an Etsy shop, book writing, and some night/weekend work.
· We obtained used appliances, furniture and lawn equipment online or from bartering with friends instead of buying new.
· We did not buy new “stuff”. Books, clothing, kitchenware and decor was swapped with friends or obtained used.
· All meals (but maybe one) per week were made at home.
· We own finely aged, inexpensive, used vehicles that get excellent gas mileage. We only drive when necessary and batch errands and trips when possible.
· We paid off all existing debt and didn’t acquire more.
· We have learned to be content with less than what the average American consumes and the trade-off, as we see it, is that our life and our time are our own to focus on what is most important to us.
· Despite being abnormally frugal, we stay highly entertained by our inexpensive choice of hobbies, YouTube documentaries, learning, working out, reading, cooking, writing, gardening, creative endeavors, d.i.y. projects, nature experiences, and spending time with people who are important to us.
· Once we were ready to build, we opened new credit card accounts with incredibly generous cash-back rewards. We put our Tiny Home expenses on them and paid them off immediately with the cash we had saved up. We never paid interest on the borrowed funds but by doing this we got 15% of our cash back!
· We have always given to charity regularly and at a set percentage as a point of principle to focus on gratitude and giving back.
It helped that we built our TH in Oregon where there is no sales tax! That saved us about $1,300 more than if we had built in Florida.
We furnished our TH for about $650. The big ticket items were a new sofa ($230), rug ($100), memory foam mattress ($100), dresser ($100) and two barstools ($120 total).
Once we moved into our TH our thrifty habits were on auto-pilot and easy to maintain. Plus, we have to be mindful about EVERYTHING that we bring home because our storage is limited. I find it easy not to participate in the consumerism culture because I know that any clutter I bring home will potentially be a headache to store. Every purchase is thought out in advance and impulse buying is a big no-no.
Managing the details of money is not especially fun to do, but the rewards of it pay indefinitely. That's why I do it.