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Should You Add a Tiny Home to Your Single-Family Rental in Travis County?

Adorable Tiny Home in Travis CountyOne option to maximize the earning potential of single-family rental home investors is to add units, specifically tiny homes, to an existing property. The tiny house movement, which began with people aiming to make their lives better by minimizing their living space and possessions, has grown into a legitimate investment opportunity. But just because it’s becoming more and more popular, that doesn’t make a tiny home a good or legal option for all investors. So, don’t make the decision to add a  tiny home in Travis County yet. Not before you do your research and learn all about it. Look for both the potential problems and potential opportunities.

If you have a project that increases both your property’s value and your rental income, it is surely worth looking into. Initially, one would think that adding a tiny home to your rental property would be a good way to accomplish both. So, before we can go in-depth, we first need to know what a tiny home really is. A tiny home is usually defined as a detached dwelling under 400 square feet. Some are on 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 combine this with a growing interest in a downsized lifestyle— fewer “stuff” and a smaller environmental impact— tiny rental homes are one housing trend that renters in many markets may welcome. Building a tiny home next to an existing rental house gives your investors the opportunity to increase their rental income without the huge cost 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 some considerations you need to go through before you add a tiny home to your rental property, however. The issue you should consider first is cost. Even if it is a small-sized residence, tiny homes still cost anywhere from $30,000 to $180,000. This means that even the inexpensive designs of tiny homes will still be 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 a lot of cities across America, 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. That’s why researching city ordinances and building codes in your area is an absolute need.

Another thing you need to take to account is how your existing tenants view a tiny home. If you have long-term tenants in your rental home, they may not be so enthusiastic about a second dwelling on the property. Adding another unit adds people, cars, and increased activity close to the home. It might also create disputes or other disagreements. Even though such a result may not happen, you must take measures to understand your current tenant’s needs before making your final choice.

Although a tiny home might add some value to an investment property, they usually don’t appreciate the same way that more traditional houses do. Specifically for tiny homes on wheels, they are believed to be depreciating assets and won’t grow in value at the same rate that the land and other structures probably 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 one thing— that adding a tiny home to your investment property can be quite challenging. Hence, the more you understand ahead of time, the better equipped you will be to thrive and succeed no matter where your decisions take you. If you do move forward with these plans, be sure to take advantage of the valuable services offered by a Travis County property manager. Give us a call at 512-580-3099 to find out how we can help.

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