Author Topic: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?  (Read 3533 times)

intotherealworld

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Here is my dilemma

Savings: $70000
Rent: $250 per week
Cost of Tiny House: $70000 (I have a place to put it rent free)

Moving city is not an option due to work.

I estimate I would get at least $30000 for the tiny house if I were to sell it after 5 years

Assuming that returns on savings are around 7%, and that if I buy the tiny house I will save (invest) what I would of otherwise spent on rent, when does buying/renting become the better option?

Here are my calculations, unsure if I'm missing anything... It seems to be about equal after 5 years taking into account the opportunity cost of money used to buy the house, and the increase in savings from not having to pay rent.

« Last Edit: February 22, 2017, 10:54:11 PM by intotherealworld »

braje

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Where are you getting 7% on SavingS? Do tiny house depreciate that much?

Villanelle

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If we are talking a truly tiny home (250sqft or less), I would spend a significant amount to avoid that and it seems like only minimal savings if your numbers are correct (but I question your interest rate, and your depreciation), but if it is a lifestyle that would truly work for you, it may be worth it.

It seems like there might be additional savings, but also additional costs that you haven't considered.  Insurance (compared to whatever you pay now for a renter's policy, if you have one?  Lower utilities for a smaller space?  Hook ups to get the tiny home up and running?  Would you be temped to eat out more? Would you spend more money going out or entertaining outside your home? Do you feel extremely confident you'd actually stick it out for 5 years in a tiny house?  That might be my biggest concern.  If you do this and absolutely hate it and can only stick it out 2 years, you'll have nearly the same depreciation numbers but with less than half the rental savings.  It's a fairly extreme lifestyle to commit to longer term, so just make sure you are being honest with yourself about whether this will be sustainable (without making you miserable, because misery surely isn't worth less than $1000/yr).

Could you find a used tiny home (or Trailer you can park)?  If they are really only $30k used, that seems a much smarter route and would make your numbers look much better. Start shopping now, especially if you can stay month to month in your current place, and then move when you find a cheaper used option. If you buy for $30k instead of $60k (and can sell for maybe $20-25k), suddenly your savings are in the 5 figures instead of 4. 

Hargrove

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No, you shouldn't spend 70k on something that depreciates 57% in 5 years. That's almost as bad as a new Hummer.

That's just assuming you calculated total price (cost of ownership, taxes, any other fees for purchasing it), and got the depreciation right. And that your "place to put it rent-free" remains available over 5 years. And that after you sell it, after taxes, fees, etc., you pocket 30k. And that you don't meet someone and want something larger in 5 years. And that your work situation doesn't change. And you gain the 7% on savings over that time.

Nowhere near worth it for a projected $800 a year for 5 years.

boarder42

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yeah the depreciation is insane.  build your own or buy a used one.  the 4k difference isnt worth it IMO at all.

Dave1442397

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If you have a space to put something, why not buy a used RV? Just taking a quick look at my local Craigslist, I see a lot of really big RVs for sale in the $10-20k region.

boarder42

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Bingo dave hit it on the head.  Tiny houses are so overrated and trendy right now.  i know a couple who quit their jobs and TOWED one around the country moving about every 3 days.  They had to buy a huge 3/4 ton truck to tow the thing and it cost over 60k to build.  vs

Something we have been building and perfecting for years A TRAVEL TRAILER.

They blew out the tires on the trailer 3 or 4 times.  Never equated it to weight but there is a 99% chance that is probably what it was.

this Tiny house trend is a stupid fad.  We've pretty much perfected light small moveable housing with travel trailers. 

I'm a red panda

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I think the idea that it will sell in 5 years is a pretty big assumption.  In 5 years, it is possible NO ONE will want this kind of trendy shed.

radram

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Why would you consider buying a depreciating asset unless it is someone else that takes the depreciation. In my area, used rv's start at under $1,000.00. This is for a VERY used one that needs a lot of work.

If you can truly get space for a tiny house/RV for $0 a month , start at craigslist and work your way up to your comfort/repair level.

+1 on the tiny fad. They began as a way to save on housing costs while lowering your footprint, and became trendy. You pay a premium for trendy.

House building costs are $125 per square foot nationally. It should cost LESS per Sq. ft. for a tiny house, not more. You should pay no more than $31,250 for a new tiny 250 sq.ft. home, or you are paying too much.

Let us know what you decide.

pbkmaine

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It's a terrible idea for all the reasons listed above.

marielle

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #10 on: February 23, 2017, 07:28:26 AM »
I would rather rent a room from somebody for half the price ($400-$500) versus the $1000 you're paying now. Possibly even in a huge house with a great kitchen, appliances, etc.

Or sign a lease together with a roommate in an apartment.

jade

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #11 on: February 23, 2017, 10:43:40 AM »
In monetary terms, I agree with other posters here. Just wondered if you've heard of www.rowdykittens.com? Tammy and her husband bought a tiny house and she shared a lot there about the experience - good and bad and not auger coating it. The last time I checked they'd started renting a cottage because I think, of the weather in the winter where they were. Anyway, things may have changed now but it might give you more insight into the realities of someone who's done it. Good luck! I would probably suggest the RV route instead too.

Minimumlevel

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #12 on: February 23, 2017, 01:23:29 PM »
We live in an RV right now, have lived in every other type of housing, and living in this amount of space should not be a problem for a single. We are two active adults and two dogs. I cook at home 28 days out of the month, B,L & D. The bonus is it will teach you a lot about what is important to you in terms of living arrangements, needs vs. wants etc... That said, do not buy new as every other poster said. Another thing I see in our area are used "park model" homes for deep discounts, and even free if you haul. Get some friends who know about construction to go with you so you don't get ripped off. How about renting a tiny or travel trailer for a trial run? Good for you for not getting in debt and thinking outside the box. Your rent is just... no.

Iplawyer

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #13 on: February 23, 2017, 01:48:07 PM »
In monetary terms, I agree with other posters here. Just wondered if you've heard of www.rowdykittens.com? Tammy and her husband bought a tiny house and she shared a lot there about the experience - good and bad and not auger coating it. The last time I checked they'd started renting a cottage because I think, of the weather in the winter where they were. Anyway, things may have changed now but it might give you more insight into the realities of someone who's done it. Good luck! I would probably suggest the RV route instead too.
Yea  - the HGTV show I want to see is "Tiny Houses - 5 years later."  My prediction will be DDD - depreciation, divorce, depression.   

pbkmaine

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Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #14 on: February 23, 2017, 02:46:38 PM »
The small apartment the most famous tiny house couple now lives in instead of the tiny house:

http://www.rowdykittens.com/2015/10/phototour/

Ocinfo

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #15 on: February 23, 2017, 03:28:55 PM »
I love the idea but the numbers just don't work unless you build it yourself and even then it's iffy. At some point I will probably build a small home on a foundation (<1000 sf) since that won't depreciate like a mobile tiny home does.


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Alim Nassor

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Re: Should I buy a $70 000 Tiny Home if it means I don't pay rent for 5+ years?
« Reply #16 on: February 24, 2017, 09:29:51 PM »
I bought a decent 1300 square foot house for 70k and spent about 10k fixing it up.   I will make money if I ever sell it, instead of losing the 40k you are looking at.