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 in popularity, it doesn’t mean that a tiny home is a good or legal option for all investors. So, don’t pressure yourself to add a tiny home in Mt Pleasant 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.
There’s no doubt about it. Improvements that increase both your property’s value and your rental income are projects truly worth considering. And, at first-look, building a tiny home on your rental property does look like a good way to get 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. Some homes have wheels, like an RV, and some are 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 consider this together with the growing interest in a downsized lifestyle, which means fewer possessions and a smaller environmental impact, it’s obvious why tiny rental homes are one housing trend that renters in many markets may welcome. When you build a tiny home next to an existing rental house, you are giving investors the opportunity to increase their rental income while sparing them the costs of buying another property. And in a lot of cases, 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 a few considerations you need to look at before you decide on adding a tiny home to your rental property. The consideration you should look at first is cost. The structure may be really tiny but tiny homes still cost anywhere from $30,000 to $180,000. This means that even the relatively cheap designs of tiny homes will still amount to a large financial investment. To make things even more difficult, it’s not really easy to get financing for a tiny home. Many lenders do not offer mortgages for tiny homes, and if you apply for other types of loans, you may have to pay a higher interest rate.
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 many cities across the country, there are strict zoning laws that prevent property owners from adding rental units to a single-family property. Some even have regulations that mandate how big a detached dwelling must be 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 should have the same requirements as any other house. There may also be more governmental permits, inspections, and utility service work required, adding to the cost of construction. This is why doing some research on city ordinances and building codes in your area is important.
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 throughout the property. It could also result in disputes or additional concerns. 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.
This is why making a decision to build a tiny home on your investment property may be a concern. When you know more ahead of time, you’ll be able to succeed in any venture you find yourself in. Whether or not you prefer to commit to these specific plans, you can make use of the benefits offered by the Mt Pleasant property manager. Give us a call at 828-342-9683 to speak to a qualified representative.
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