Think Tiny When it Comes to 2016 Real Estate InvestmentsHousing-Market / UK Housing Jan 11, 2016 - 05:11 PM GMT
Larissa James writes: For years, homes have been getting bigger and bigger. As a result, real estate investors have tied their money up in massive properties and McMansions. And while there will always be a demand for large luxury homes, there’s a growing trend that’s evolving into a new real estate investment opportunity. They’re classified as “tiny homes,” but cash flow is anything but tiny for those willing to take on new risks.
The Tiny House Movement
“The tiny house movement has taken the suburban dream, flipped it, bent it, upended it and created a whole new approach to everyday living,”writes Rachael Hyde of Investopedia. “With that change in approach comes the emergence of a whole new financial model—altering the way income is apportioned and household priorities arranged for those who move into this type of home.”
While the tiny house movement currently involves just a small sub-segment of the market, it’s clear that there’s room for growth in the coming months. Along with that growth comes a new evolving investment market.
At the heart of the tiny house movement is the millennial generation, who is largely interested in sustainability and cost-efficiency. As Hyde points out, a tiny house generally costs somewhere between $10,000 and $40,000 to build. In fact, the average comes in right around $23,000.
With such a friendly price point, most tiny house owners have no mortgage. They own their homes free and clear. However, more than half rent the land their homes sit on because they can’t afford the initial down payment. That’s where much of the investment opportunity comes into play.
Finding a Profitable Market
“The tiny house market is burgeoning across the nation, but it’s becoming especially popular in Wisconsin, Florida, California, and Texas,”mentions Green Residential, a Houston-based property management company.
While real estate investors in these four states should actively pursue this investment strategy, investors in other states should also take note. “No matter where you live, there could still be reason to invest; due to their size, many tiny houses are mobile,” Green Residential continues. “They can be built in a low-cost area and, once complete, relocated to a permanent site.”
From an investor’s perspective, the key is to find land that tiny homeowners would want to live on. Generally speaking, they need flat land with some access to electricity and water. They also typically prefer quiet areas with access to nature. While it’s entirely possible that there will be a future demand for urban tiny homes, most of the current market is gravitating towards secluded real estate. This goes hand in hand with the desire to be sustainable.
It’s not just real estate that investors are profiting from, though. Savvy investors are making money from renting homes and even lending money for construction. One website is even connecting interested tiny home buyers with those willing to finance moneythrough peer-to-peer lending.
While the tiny home movement may not be large enough for seasoned real estate investors to get involved with yet, all of the signs indicate the future is bright. As soon as you see a sector of the marketplace move beyond recreational activity and evolve into a micro economy, it becomes apparent that something bigger is happening. This is certainly the case with the tiny house movement.
Think Tiny When it Comes to 2016 Real Estate Investments
“With tiny homes filling a market niche for communities, travelers, and the less fortunate, it is safe to assume that they are not just another fad in the real estate industry,”writes Terri Engels of Realtor Mag. “While the grass won’t always be greener in a smaller yard, investors would be wise to investigate tiny-home opportunities now, while the niche is still novel.” Will you seize the opportunity?
By Larissa James
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