Are Tiny Homes a Scam?

When I first published my best-selling book “Going Off The Grid,” the tiny home movement was in full swing. There were numerous TV shows, magazines, and websites dedicated to living the tiny home lifestyle. It appears it has cooled off a bit since then, but it is still pretty popular today for those looking to simplify their life. So what is a tiny home? It’s a house that is constructed on a rolling chassis (like a travel trailer) or a permanent home that is 500 square feet or less in size. 

The base upon which mobile tiny homes are constructed—the aforementioned moveable chassis—is a steel frame with wheels, pretty much like a utility trailer that you would tow behind your vehicle. Some people buy plans that show them how to build the tiny house on top of the rolling chassis. Others do it themselves or pay a company to build the house to their specifications.

Tiny homes are primarily built with standard wood framing/stick construction, like a typical wooden framed-in house you might see built on a plot of land. Yet, many mobile tiny homes are built right on top of the moveable chassis. These tiny homes are usually under 8.5 feet wide and vary in length from 12 to 24 feet. They’re also restricted to 13.5 feet in height so they can fit under highway underpasses when being moved.

What Everyone Should Know About Tiny Houses

The primary reasons these tiny homes are popular has to do with them being mobile like a travel trailer but cheaper than a standard home. Makes sense right? But, just like anything trendy, there is usually hype and little substance behind the claims. In my view, mobile tiny homes are usually not the best option for off-gridders and simplified living enthusiasts because…

  • Tiny houses are trendy, and anything trendy is usually backed by people looking to make a quick buck.
  • Tiny houses are incredibly expensive for their size. Their prices that frequently range from $450 to $650 per square foot. In comparison, an average custom-built house is in the $100 to $200 per square foot range, typically with the land included (although this does vary from area to area, of course).
  • Tiny houses have to be inspected and registered by your local motor vehicle division, meaning you must pay ongoing, yearly registration costs.
  • A tiny home will typically have higher insurance premiums than an RV.
  • Tiny houses are very heavy, usually over 10,000 pounds. In comparison, my traditional travel trailer weighs a little over 5,000 pounds.
  • They can be dangerous to move because they tend to be very top-heavy.
  • They usually lack plumbing. If you want standard RV-style plumbing, it usually comes with an upcharge.
  • They are usually made primarily of wood and are thus a fire hazard compared to RVs.
  • Numerous counties will not allow you to use it as a permanent dwelling, thus at times you are not allowed to live in a mobile tiny home on your property.

I went to one of the more popular mobile tiny home manufacturer websites and priced out one that was around the same size as my current travel trailer. It came out to $70,550! I purchased my travel trailer brand new for $25,500. Don’t get me wrong, the tiny home trailer was made from nicer materials, but it had no more functionality than my travel trailer. Unless you plan to move your dwelling once it is on location, a good alternative to the mobile tiny home is a regular house constructed just like a normal residence, only smaller.

I have lived in a “tiny home” by this definition—I called it a cottage—and I really enjoyed the simplified living. I originally thought about going this route when building my off-the-grid house, but I decided to go bigger. The main reason is that my off-grid home is still an investment. If I built a very small house, should I ever decide to (or had to) sell the property, the pool of prospective buyers would be drastically narrowed. Like many off-gridders, I plan to live in my off-grid property long term. However, unplanned events can happen in life, and I would rather build a house that is easier to sell should I need to.

Tiny homes have also become very trendy. With anything trendy, you should be prepared for those aforementioned bad contractors that prey upon the naïve by charging extra money for what’s popular. I have heard unscrupulous contractors repeat a specific, unfortunate phrase time and again…

 “Smaller means more expensive.”

No, it doesn’t, actually.

In some parts of the construction process, yes, smaller does mean more expensive, because there is a fixed cost to the “starter” elements needed for a construction job. For example, the price of bringing heavy machinery to a remote site or the cost of permits will be the same whether the job is small or massive. This type of fee will obviously increase the average cost per square foot for your house relative to a larger project. 

Now, in the big picture these costs should not add a drastic amount to your total fee, but guess what good old Joe Bag O’ Donuts (the incompetent contractor) does? He charges up (adds unjustifiable fees) to a smaller project . . . not because it costs more. He does this because he wants to make a killing for doing less work. I have been quoted these kinds of inflated prices by contractors and witnessed contractors doubling or tripling the cost for small projects.

I’ll be honest; it can be difficult to even find a contractor willing to do a small project unless they can charge inflated prices. In their mind it just isn’t worth it to do the project for a reasonable fee. That makes sense for a big-time busy contractor. But for your small community everyday contractor, this is a terrible business move. Contractors who bid like this usually go belly up when the economy trends down because they refused to stay busy with big and small projects alike.

Sure, when buying certain building supplies in a larger quantity, you can get a discount. But you should not pay three times more per square foot for a smaller house than you would pay on a larger project.

So what’s the solution? If you decide to go tiny, make sure that your tiny house is built at a fair cost. Consider purchasing an off-the-shelf set of tiny home building plans and getting the materials yourself. Then have your contractor bid on labor only, with a “not to exceed more than” clause in the job contract. Any contractor worth their salt will have no problem doing this, as it makes their life a lot easier. Instead, they have someone else put together the building plans and get building materials. This way, all they have to do is show up and build, while you are the gofer who gets whatever they need. Also, most builders/contractors love the building side of things. So it could be a motivator to get someone who would not regularly take on such a project.

If you don’t have a truck or can’t get the supplies yourself, ask if your building supply company will deliver them directly to your site. Ask what additional fees this might add. A good set of tiny house plans will actually have a materials list which you can send to your building supply company. This is called a “building package”. Also consider how you will store the supplies at your site (preferably in a secure, weather-proof location such as a shed or lockable trailer). If you leave them out in the elements, they could get ruined or stolen before you have the chance to use them.

For some off-gridders, the delivery method mentioned above may not be an option. Remember building remotely means delivery might not be possible because of distance, poor and/or inaccessible to big vehicles, road conditions, etc. This happened in my case—almost all the materials for my project (except concrete, more on this in a bit) had to be hand-carried. On one job, we ended up having to get a bulldozer to drag the cement truck up to my building site. This created two problems. First, we could only fill the truck up halfway (to keep it at a good towing weight), so I had to pay double the price for my concrete. Second, the first truckload was almost full and about killed the (very expensive) bulldozer and tore the crap out of the concrete truck. It was so bad those contractors have never called me back, even though I’ve called them with several job opportunities. Since then, all my cement had to be mixed with a small mixer or in a wheelbarrow and poured out by hand. Are you starting to see why your roads are an important part of your property hunt?

Remember to carefully track the money you spend on building supplies. This is called a “bill of materials” in contractor-speak and should include the cost of labor for building your home. Depending on your circumstances, this may impact the capital gains taxes you owe when you eventually sell.

Finally, make sure you can return excess or unused supplies or items to the store. When building remotely, it is better to have extra than not enough. I always try and buy more supplies than I need. Believe me, those trips for a bag of screws or a couple more pieces of lumber add up. I usually wait until I’m done with a certain phase of my project before I take back the extra or unneeded supplies. You never know what and how much you need until the project is close to done.

Of course, some good contractors will charge fairly for a tiny home project. But it usually takes more time and effort to find these contractors. Those I have found are usually into the off-the-grid or simple-living lifestyle themselves. Remember an off-the-grid building project is already a non-typical project. Throw in a tiny home on top of that, and you’re making it even more unusual. Hard to find the right talent when you’re taking the road less traveled.

Now, if you plan to build a tiny house on your own, it will cost you far less. The odds of you recovering your initial investment will be far higher. Even with greatly narrowing the potential home-buying demographic by building a tiny house rather than a regular house. I know people who built a standard stick-built tiny home for around $35 to $50 a square foot. That’s about a third to a quarter what you will pay for today’s new construction home in 2020.

You can save even more by doing all of the work yourself—especially if you use materials from your own land. I will warn you though; this is not as easy as it sounds. Otherwise, everyone would be doing it. If you have ever tried to mill your own lumber from a log or splice your own hand-split wooden shingles in your backyard, you know what I’m talking about. However, building a tiny home from the resources on your own land is doable, especially if you’re handy and have a lot of time to devote to the project.

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