One of the options that single-family rental home investors have to maximize their earning potential is to add units, specifically tiny homes, to an existing property. The tiny house movement, which began with people aiming to make their lives better by minimizing their living space and possessions, has grown into a legitimate investment opportunity. But despite its growth in recent years, it doesn’t mean that everyone should build a tiny home. It still may not be a good— or legal— option for the moment. So, don’t pressure yourself to add a tiny home in Leland right away. You still need to do your due diligence and learn as much as you can about it. Find out what problems you might encounter as well as what potential it has.
If you have a project that adds to your property’s value while simultaneously increasing your rental income, it’s certainly something you should consider. And, at first-look, building a tiny home on your rental property does look like a good way to get both. So, what exactly can be considered a tiny home? It’s widely accepted that it is a detached dwelling with an area smaller than 400 square feet. Some are on wheels, like an RV, and some are built on a permanent foundation.
The high housing prices across the country have given rise to the huge demand for affordable rental homes. There is also a growing interest in a downsized lifestyle— one with fewer possessions and a smaller environmental impact. Now, when you add these two things together, you can see that tiny rental homes are one housing trend that renters in many markets may welcome. Building a tiny home next to an existing rental house gives your investors the opportunity to increase their rental income without the huge cost of buying another property. And in many instances, 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 some things you still have to consider before deciding to add a tiny home to your rental property, however. The first thing you should probably consider is cost. Even if it is a small-sized residence, tiny homes still cost anywhere from $30,000 to $180,000. This means that even the inexpensive designs of tiny homes will still be a large financial investment. Adding to this is the harsh reality that planning and finding financing for a tiny home could be quite hard. Many lenders do not offer mortgages for tiny homes, and if you go for other types of loans, you may end up paying higher interest rates.
More than just the cost of building a tiny home, you’ll have to take the local zoning regulations and building codes into consideration. In numerous cities, there are strict zoning laws that prevent property owners from adding rental units to a single-family property. In fact, several could have regulations that specify exactly how big a detached dwelling needs to be for it to be legally occupied.
Local governments can also be very strict about building codes. Many require that all dwellings are built on foundations and that tiny homes should also meet the same requirements as any other house. There may also be other requirements such as permits, inspections, and utility service work, adding to the cost of construction. This is why doing some research on city ordinances and building codes in your area is important.
Another thing you need to consider is what your tenants think about an additional tiny home. If there are long-term tenants living in your rental home, they may not like the idea of a second dwelling on the property. Adding another unit adds people, cars, and increased activity throughout the property. It could also result in disputes or additional concerns. Although these unfortunate reactions may not happen, you should still take the necessary measures to understand your current tenant’s needs before making your decision.
Lastly, while a tiny home may add value to your investment property, the way they appreciate it isn’t the same as how traditional houses do. Specifically for tiny homes on wheels, they are believed to be depreciating assets and won’t grow in value at the same rate that the land and other structures probably will. Tiny homes built on foundations tend to fare better on resale value but may still lag behind traditional homes.
This is why making a decision to build a tiny home on your investment property may be a concern. Nevertheless, the more you understand in advance, the likelihood that you will be able to succeed regardless of where your present-day choices lead you. Whether or not you prefer to commit to these specific plans, you can make use of the benefits offered by a Leland property manager. Give us a call at 910-782-4488 for more helpful information.
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