Tiny Homes: A New Frontier in Short-Term Rentals

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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y

Hey @Kandi Sterling, not a new frontier. This has been going on for a number of years.

Basically it has limited appeal for mass market. Unless the place in an amazing location that couldn't support a full size home, you are better off doing a regular place.

A tiny home isn't considered real property. It is more of an RV or the like. It adds little to no value to the land. What adds value is the sewer/septic, water and electric at the site.

If the tiny home is more like a medium home (600+ sqft) on a foundation, then you should be able to look at it as a "stick built" or normal home, just small.

If you do a search, you will find some info.

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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    Hey @Kandi Sterling, not a new frontier. This has been going on for a number of years.

    Basically it has limited appeal for mass market. Unless the place in an amazing location that couldn't support a full size home, you are better off doing a regular place.

    A tiny home isn't considered real property. It is more of an RV or the like. It adds little to no value to the land. What adds value is the sewer/septic, water and electric at the site.

    If the tiny home is more like a medium home (600+ sqft) on a foundation, then you should be able to look at it as a "stick built" or normal home, just small.

    If you do a search, you will find some info.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    Tiny homes are going to be a different clientele...

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  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    I would consider this just a niche market segment.  I always wanted to do a tiny home village on the beach with shared amenities like a pool, but could not make the numbers work.

    Not sure as a traveler I would stay in one or not, but I am sure there is a market for it.  To me the money is in larger groups.

    [email protected]813-563-0877
    Vacation Rentals of Florida53 Reviews
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  • Garrett BrownPro Member
    Rental Property Investor · Houston, TX · Member since 2024 · 516 posts · 553 votes
    2y

    Hey @Kandi Sterling , welcome to the forums! Are you asking about feedback on THOW or trying to inform us about them?

    [email protected]
    BiggerPockets
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  • Kandi Sterling
    OP
    Member since 2024 · 8 posts · 1 vote
    2y

    Thank you everyone for the feedback. And I agree that it is a niche market segment and that they draw a different clientele. However, it can be a lucrative one. THOWS can be useful to the homeowner who has a little extra land and wants a new income. They are extremely attractive to the younger generations of travelers who want an experience when they travel. They are also appealing because they are eco-friendly, again appealing to the younger generations of travelers. 

    And while they are not high-income, they have a high ROI. They can be purchased fully finished for around $85,000 and rent consistently (at least along the East Coast) for $190 a night with strong bookings year round. That means that they are completely paid for in about 3 years.

    Tiny home villages can be very attractive and produce a good income. Mr. Baum is correct that they have limited mass market appeal, but they do appeal to the younger, growing traveler so the market is only going to get larger. 

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  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y

    I own the world's largest tiny home.  It's over 3500 square feet, but I've run out of room for my stuff.

    [email protected]806-672-7102
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  • Jon Martin
    Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Andrew Steffens:

    Not sure as a traveler I would stay in one or not, but I am sure there is a market for it.  To me the money is in larger groups.

    Agreed. I've also noticed that large groups/properties book well into the future more often than smaller properties. Which makes sense intuitively.  After comparing the performance I don't think I could ever go back to anything under 4 bedrooms. 

    I can also count on 1 hand the number of tiny home designs I've seen that don't look like repurposed tough sheds and/or have awkward dimensions. The only one that comes to mind as being somewhat appealing is the one that Elon Musk is supposedly an investor in. 
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  • Kandi Sterling
    OP
    Member since 2024 · 8 posts · 1 vote
    2y
    Quote from @Collin Hays:

    I own the world's largest tiny home.  It's over 3500 square feet, but I've run out of room for my stuff.


     Yes, tiny homes can be challenging to live in full-time. We aren't building them to live in full-time. Ours are much cheaper per sq ft because they are designed to be used in the short-term rental market. 

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  • Kandi Sterling
    OP
    Member since 2024 · 8 posts · 1 vote
    2y
    Quote from @Jon Martin:
    Quote from @Andrew Steffens:

    Not sure as a traveler I would stay in one or not, but I am sure there is a market for it.  To me the money is in larger groups.

    Agreed. I've also noticed that large groups/properties book well into the future more often than smaller properties. Which makes sense intuitively.  After comparing the performance I don't think I could ever go back to anything under 4 bedrooms. 

    I can also count on 1 hand the number of tiny home designs I've seen that don't look like repurposed tough sheds and/or have awkward dimensions. The only one that comes to mind as being somewhat appealing is the one that Elon Musk is supposedly an investor in. 

    Thank you so much for pointing out both of those issues. The larger homes do rent well and are frequently booked further out because they appeal to a group traveling together and they do rent for much more per day. It is a different market. But that doesn't mean that in the long run the small, unique units don't rent well. While it is true that they don't bring in as much per night, they are a higher ROI because you invest so little and their maintenance and initial costs are so low.

    Second, I love your observation that they just don't LOOK appealing. The ones we build are built on heavy-duty trailers with engineered plans and steel frames. They will outlast most stick-built dwellings with a fraction of the maintenance and have a lifetime guarantee to back them up. The interior is finished with pine paneling to give a warm and inviting feeling of cozy comfort. 

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  • Jon Martin
    Member since 2022 · 1k+ posts · 1k+ votes
    2y

    @Kandi Sterling yes, you are correct about why larger properties book out further in advance. That is not requirement for profitability but I certainly sleep better at night. 

    I do agree that smaller units can be a better ROI than 2- and 3- bedroom properties, especially since there is so much overlap in the guest avatars between those bedroom counts. I personally don't like 3 bedrooms because the nightly rate to be profitable is too expensive to compete with hotels and 1- and 2- bedrooms, but not enough space for larger groups. That said, I don't think I could've acquired 2 smaller properties for the price of my 5 bedroom that also outperformed it.

    As for your tiny home photo, I'm simply not a fan of that design. I don't doubt the practicality and workmanship, however the design doesn't do it for me. I think tiny homes are constrained by the dimensional requirements to be street legal without a state trooper escort. I've seen some great designs in the container or mini-MCM realm, however a lot of those have square footage that is closer to a small house than a true tiny home. 

    To each their own- I hope you have success. 

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  • Trent Reeve
    Atlanta · Member since 2022 · 712 posts · 642 votes
    2y
    Quote from @Andrew Steffens:

    I would consider this just a niche market segment.  I always wanted to do a tiny home village on the beach with shared amenities like a pool, but could not make the numbers work.

    Not sure as a traveler I would stay in one or not, but I am sure there is a market for it.  To me the money is in larger groups.

    they have this in Panama city. unsure of the numbers, but location is great. shares amenities with the RV campground.

    https://campersinn.net/camp-sites/camping-cabins/
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  • Kandi Sterling
    OP
    Member since 2024 · 8 posts · 1 vote
    2y

    There are several of these tiny home villages around the county and they are doing very well. They are not aiming at full-time residents. They are aiming at the new generation of vacationers. And the ROI is high. You can buy about 4 of these units for the cost of a single-family home in most parts of the country. And the maintenance on all 4, including utilities is much less.

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  • Trent Reeve
    Atlanta · Member since 2022 · 712 posts · 642 votes
    2y
    Quote from @Kandi Sterling:

    There are several of these tiny home villages around the county and they are doing very well. They are not aiming at full-time residents. They are aiming at the new generation of vacationers. And the ROI is high. You can buy about 4 of these units for the cost of a single-family home in most parts of the country. And the maintenance on all 4, including utilities is much less.

    ehh, i would have to see the numbers. Most lenders wont provide a mortgage on a "tiny home". and rental rates wont be much higher than a hotel. I know I couldnt visit with my kids. Yes, there is likely a niche traveler market, but the people that are really spending money on vacations arent going to want to stay in a small accommodation. most vacationers are bringing family and want a little bit of space
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  • Kandi Sterling
    OP
    Member since 2024 · 8 posts · 1 vote
    2y

    These units do not need a mortgage. They are classed as RVs and we have financing for them. You are right, these don't attract families, although there is a very successful group called Gateway Vacation Home Rentals that are featured on VRBO and other sites. They group these units so that families can stay in several units around a campfire and they have several locations across the country. 

    This is NOT an investment for the typical, conservative investor. It is for the investor who is in tune with the new type of traveler and who wants to be at the forefront of a new wave of high ROI returns.

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  • Villy Ellinger
    Real Estate Agent · Fort Walton Beach, FL · Member since 2018 · 219 posts · 275 votes
    2y

    @Kandi Sterling I think this is a very relevant topic. I'm on the Emerald Coast of FL (Destin - Fort Walton Beach) and I have noticed that there have been several investor developments, where an investor buys a property that also has some extra land and then adds tiny homes on the extra land to use for additional STR housing. In areas that are very tourist-desirable, like coastal/beachfront resorts in FL tiny homes can provide an alternative to higher priced hotel rooms and attract a younger clientele that is not looking to book the large (sleeps-12-at-a-time) condos. I can't speak of other type locations, but here by the beach, a tiny home located close to the beach can be a very attractive rental. A place to sleep, shower and shelter a bit, while not doing all the outdoor stuff that are the main attraction anyway.

    I particularly see the appeal if tiny homes can be added to the land of an existing property. Obviously, there are permits and paperwork, etc. But if you have the land already... well, might be worth it. As a realtor I have seen a number of properties, especially in the PCB area, that come with larger lots that are zoned for more that one building. Definitely following this discussion.

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  • Trent Reeve
    Atlanta · Member since 2022 · 712 posts · 642 votes
    2y
    Quote from @Kandi Sterling:

    These units do not need a mortgage. They are classed as RVs and we have financing for them. You are right, these don't attract families, although there is a very successful group called Gateway Vacation Home Rentals that are featured on VRBO and other sites. They group these units so that families can stay in several units around a campfire and they have several locations across the country. 

    This is NOT an investment for the typical, conservative investor. It is for the investor who is in tune with the new type of traveler and who wants to be at the forefront of a new wave of high ROI returns.

    you keep saying "high ROI returns" without any data to back it up. and I have a couple of 3 bedroom beach properties and I dont always get $190 a night. i mean, good for you, but it seems like you are coming on here trying to sell a product rather than just discussing it.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y

    You may have a solid business here.....or not. Time will tell.

    I've always been wary of businesses that cater to a limited market. It would be like opening a restaurant that limited it's clientel to one generation.

    You seem deadset on it though and don't really want or need our validation/approval...best of luck to you....

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    The value is the land, first. Then the resource, then the structure.

    This defeats the latter purpose. It's gimmicky, that does not mean it does not appeal to some. Of course it does. But so does getting life insurance.


    The only one's to really speak them up are the one's selling them.

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  • Dan Thomas
    Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes
    2y

    @Kandi Sterling

    Where specifically do you see these CONSISTENTLY renting at 190 a night on the east coast?

    Can you share some links?

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  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    2y

    I wouldn’t say it’s a New Frontier I mean you can buy tiny homes on both Amazon and from Home Depot now. The problem is that very few locations allow them. Almost everywhere requires homes to be attached to a foundation. There is a 22 tiny home community near me in Lyons, CO called WeeCasa and they’ve been successful with it since 2015. However they had to have the laws changed in order to operate, which only happened because of a specific set of circumstances involving a huge flood and the owner being friendly with the mayor. I believe they are still illegal everywhere else in the state. There was a guy on BP who tried to get one going down by Colorado Springs awhile ago called Bonsai Village and got as far as buying the land, but could never get permission due to NIMBY neighbors  and it got stalled in legal red tape until the  land eventually ended up being foreclosed on and turned into open space. Your biggest hurdle will be dealing with regulation red tape, and finding a place where it can be done. You may have to have a special relationship with the mayor, or stick to trailer parks that are already zoned for this use. Otherwise it can be years of dealing with legal/ regulatory issues and angry neighbors. 

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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    So some of the statements made by the OP change the tenor of this discussion. She is already invested in this as a builder and even offering financing.

    This is now obviously some self promotion...

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