Looking to Invest in a Big Real Estate Trend? Try Tiny Houses.

Call them baby bungalows. Cozy cribs. Even dollhouses. Whatever the name, the tiny house market is a far cry from being a minuscule blip on the real estate radar.

So how large is the tiny house market that’s booming? Pretty substantial. According to a 2020 IPX1031 poll of some 2,000 Americans, more than half of participants said they were open to living the tiny life. What’s more, 86% said they’d contemplate buying a tiny house as their first residence, and another 84% could see themselves living big during their golden years in a home boasting a footprint of around 400 square feet or less.

What makes these humble castles so appealing? For one, they’re uber efficient. Full disclosure: I’m a huge efficiency nut, which is one of the reasons I entered the mobile home and affordable housing industry almost four decades ago. And when I see the clever use of livable space in well-designed tiny homes, I’m always impressed.

Another bonus is affordability. The median price of tiny homes is a far cry from the median price of most homes in America, which hovers around the $295,000 mark.

3 Things to Know About Investing in Tiny Houses

With that, should you jump on board, given that tiny house market trends show signs of growth and longevity? I have. I personally feel that this isn’t a fad. And if it is, it’s bucked all the expectations. Remember: McMansions were called a fad, too, but they’re still around. It’s simply that they serve a unique market, just like tiny homes.

Before committing yourself to tiny house-related business opportunities, however, you’ll want to keep a few truisms in mind so you position yourself for serious success:

1. Investing in a tiny home business requires startup funds. You can launch some companies on a shoestring budget, but that’s not the case with an investment in tiny houses. You’ll need to have enough capital to cover a variety of costs.

First off, you’ll have to pay for building materials and blueprints. Additionally, you’ll need a team of professionals to build your homes from scratch. And your costs for laborers, foremen, and supervisors will probably be higher than any other expenses on your balance sheet.

Of course, you’ll want to bring in other employees as well to help with sales, administrative duties, and marketing. And though you might be able to get away with working out of your home initially, you’ll also probably have to lease office space, so factor that cost in, too, as well as related charges for internet, utilities, and the like.

Finally, you’ll need to set aside funds to buy land you can build your tiny houses on. Land parcels can run the gamut from inexpensive to outrageous. Consequently, your tiny house investment can’t happen if you don’t have access to dollars.

2. You need to understand your target market. Don’t assume anything right off the bat about people willing to protect their nest eggs by living in cozy homes. Instead, do research about tiny home communities online. For example, you probably will find two types of homeowners attracted to tiny homes when you explore this market. The first is usually young, creative, and environmentally motivated. The second is interested in the aesthetics of tiny living but doesn’t want to give up on life’s luxuries. These are distinctive personas.

This isn’t to suggest you couldn’t have homes for both groups. You can if you plan it out right. For one group, you might outfit the interior of your tiny houses with furnishings made from reclaimed wood or add solar panels to the roof. For the other group, your tiny houses might be outfitted with anything from high-end artwork and appliances to polished hardwood floors and stained-glass windows.

In total, it’s important that you know and define your audience (through tools such as, say, market surveys) before making assumptions. Otherwise, the designs of your tiny houses might not resonate with buyers.

3. Your tiny home investment has to include room for in-person education. Many people are intrigued by tiny homes. Nevertheless, intrigue alone won’t make the cash register ring. You have to help prospects understand the product so they have the assurance that purchasing a tiny home makes sense. Even if you offer a high-end virtual 3D model of a tiny house online, you need some real-world model homes. After all, most people won’t buy properties unless they feel a connection.

Here’s my advice: Construct at least one or two tiny houses for buyers to visit. I plan to set up three tiny homes to display in my area, and my goal is to build buzz by showcasing our business’s super-small houses. Too many folks assume tiny homes are like scaled-down treehouses, and they don’t understand how roomy and charming a tiny home can be until they get inside.

Are tiny houses a good investment to add to your portfolio? They’re certainly worth more than a passing glance. Who knows? You could find that the road to making it big starts with something surprisingly small.