One of the ways that single-family rental home investors can maximize their earning potential is to add units, specifically tiny homes, to an existing property. The tiny house movement, which started with people wanting to downsize both their living space and possessions, has grown into a legitimate investment opportunity. But just because it’s gaining ground, it doesn’t mean that all investors ought to join in. A tiny home may not be a good— or even legal— option right now. So, before you make the decision to add a tiny home in Elizabethtown, it’s critical that you find out as much as you can about it. Find out about both its potential and risks.
If you have a project that increases both your property’s value and your rental income, it is surely worth looking into. And the first impression about adding a tiny home to your rental property is that it’s a good way to achieve both. So, before we can speak in detail about it, we need to define it. What is a tiny home? The generally accepted definition is that a tiny home is a detached dwelling with an area under 400 square feet. They can be on wheels, like an RV, or built on a permanent foundation.
The high housing prices across the country is the main reason why a lot of people are looking for affordable rental homes. When you add to this the growing interest in a downsized lifestyle of fewer possessions and a smaller environmental impact, then its clear that tiny rental homes are one housing trend that renters in many markets will welcome. Constructing a tiny home next to an existing rental house does two things for your investors. First, it increases their rental income, and second, it spares them from the costs of buying another property. And often, adding structures to the property will increase the property’s appeal to renters needing multiple units as well as add to the property’s overall value.
There are things to consider before moving forward and building a tiny home on your rental property, however. The first thing you should look at its cost. It may be a tiny building, but tiny homes still cost anywhere from $30,000 to $180,000. This means that even the affordable types of tiny homes will still end up being a large financial investment. To make things worse, it’s not easy to secure financing for a tiny home. Many lenders do not offer mortgages for tiny homes, and other types of loans would require you to pay it off at a much higher interest rate.
Other than the cost of building a tiny home, you’ll want to take the local zoning regulations and building codes into consideration. In many locations, there are strict zoning laws that prevent property owners from adding rental units to a single-family property. Some even have regulations that prescribe the size of a detached dwelling. It needs to be big enough in order to be legally occupied.
Local governments can also be very strict about building codes. Many require that all dwellings be built on foundations and that even tiny homes need to meet the same requirements as any other house. There may also be some additional governmental requirements such as permits, inspections, and utility service work, adding to the cost of construction. This is why learning the city ordinances and building codes in your area is a must.
You also need to consider what your current tenants will think about a tiny home. If you have long-term tenants in your rental home, they may not be warm to the thought of having a second dwelling on the property. Adding another unit adds people, cars, and increased activity close to the home. It may also lead to disputes and other issues. Although these negative reactions aren’t guaranteed, you should still act conservatively and take the necessary steps to understand your current tenant’s needs before making your decision.
Finally, while a tiny home may bring in additional value to an investment property, they don’t usually appreciate the same way that traditional houses do. This is even more true for tiny homes on wheels. These homes are considered depreciating assets and won’t grow in value at the same rate that the land and other structures likely will. Tiny homes built on foundations tend to fare better on resale value but may still lag behind traditional homes.
All these reasons show us that making the decision to add a tiny home to your investment property can be difficult. Hence, the more you understand ahead of time, the better equipped you will be to thrive and succeed no matter where your decisions take you. Should you move forward with these plans in mind, don’t forget to make full use of the highly valued experience and services of an Elizabethtown property manager. Give us a call at 682-831-1300 to speak to a qualified representative.
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