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, before you make the decision to add a tiny home in Jefferson, it’s critical that you find out as much as you can about it. Find out about both its potential and risks.
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. Initially, one would think that adding a tiny home to your rental property would be a good way to accomplish both. So, what specifically is considered a tiny home in this case? It’s generally accepted that a tiny home is a detached dwelling that is under 400 square feet. Some homes have wheels, like an RV, and some are built on a permanent foundation.
There is a high demand for affordable rental homes right now due to the high housing prices across the country. 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. Constructing a tiny home next to an existing rental house does two things for your investors. First, it increases their rental income, and second, it spares them from the costs of buying another property. And many times, 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 things to consider before moving forward and building a tiny home on your rental property, however. The first thing you should look at its cost. Regardless of being a smaller structure, tiny homes still cost anywhere from $30,000 to $180,000. This means that even the affordable types of tiny homes will still end up being a large financial investment. To make things worse, it’s not easy to secure financing for a tiny home. Many lenders do not offer mortgages for tiny homes, and if you try other types of loans, you may be forced to go for a higher interest rate.
Besides the cost of building a tiny home, you must 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. A few even have regulations that mandate how big a detached dwelling has to 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 need to 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 shows the importance of doing a little research on city ordinances and building codes in your area.
Another thing you need to consider is what your tenants think about an additional 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 may also cause disputes or other arguments. Although such feedback is not guaranteed, you must try to understand your current tenant’s needs when 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.
All these reasons show us that making the decision to add a tiny home to your investment property can be difficult. 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. If you do move forward with these plans, be sure to take advantage of the valuable services offered by a Jefferson property manager. Give us a call at Jefferson 706-864-5456 for more useful information.
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