Blog & Advice

Should You Add a Tiny Home to Your Rental Property? 

The tiny home market is a small niche within the real estate industry. But it has attracted a lot of attention in recent years as more property owners consider the potential of tiny homes as income properties. At the same time, the question of whether or not you should add a tiny home to your existing rental property is one that requires a deep understanding of your local market and zoning ordinances. There are many things to consider before adding a tiny home to your rental property.

What Is a Tiny Home?

A tiny home is defined as one with less than 400 square feet, a dwelling that utilizes hyper-efficient design to create a functional living space. The cost of building a tiny home can vary widely, from $20-40,000 if you are handy and can build it yourself, or up to $100,000 to have someone build it for you. Of course, those numbers do not include the land or other expenses, such as a septic system or connecting to public sewer, gas, and electricity.

Next to cost, the appeal of a tiny home is the most important aspect to consider. Until recently, these tiny homes appealed to individuals looking to live a more simple, self-sufficient life. Many of them were do-it-yourself homeowners looking to avoid mortgage responsibilities and high levels of home maintenance. Because of the relatively new trend of renting tiny homes, however, there is little evidence to say whether the appeal is there for tenants or not. Industry experts speculate that in some areas, especially where housing costs are extraordinarily high, there may be an increasing demand for tiny home rentals. Potential demographics for tiny home rentals include younger people looking for affordable rent or aging individuals looking to downsize.

What About Your Current Tenants?

Adding a tiny home to an existing rental property also brings up the issue of whether or not the tenants in the main house are willing to share space with another tenant, and how that might affect the amount of rent you’re able to charge for both homes. In some cases, tenants looking for single-family rental homes will not find the prospect of having a tiny home in their backyard appealing, making your property harder to lease. On the other hand, an increasing number of renters are looking for homes with attached or adjacent apartments or in-law suites. For these renters, being able to rent both properties at a higher rate might be exactly what they’ve been searching for.

Legal Aspects of Adding a Tiny Home

Finally, no consideration of adding a tiny home is complete without a close look at the legality of doing so. In some places, local zoning ordinances are attempting to curb the increasing numbers of tiny homes in their districts with strict regulations. Some municipalities even prohibit dwellings smaller than a certain size, often 1,000 square feet. They may be concerned that smaller homes will negatively impact property values in the entire neighborhood, or may have safety concerns. Whatever the reason, at the moment tiny homes are rarely considered a legal permanent residence in their own right. One way to get around such laws is to build the tiny home on the same property as a larger house and then classify the tiny house as an accessory dwelling unit, which some states do allow. No matter where your rental property is located, a careful reading of your local laws and zoning ordinances is important before adding a tiny home.

Deciding whether or not to add a tiny home to your rental property can be a challenge. There are many different elements to consider, and a lot of information to gather before knowing whether a tiny home is right for your market. Real Property Management can help property owners make this decision by providing detailed market information and other assistance designed to make such a tough decision easier. Please contact your nearest Real Property Management office for more information.