Sure, you already know a tiny home is likely to be a fraction of the cost (and size) of a traditional starter home. But you may be curious how the two home types compare when it comes down to day-to-day living costs—and which one shakes out to be a better investment in the long run.
While expenses (often unexpected ones) are a common denominator in ownership for both home types, the things that will siphon money from your savings account can differ dramatically between the two. Here, a breakdown of home ownership costs: Starter home versus tiny home edition.
Utilities: Tiny homes for the win
Tiny homes have small footprints, which translates to lower utility costs, points out Romana King, a real estate expert with Zolo, an online real estate marketplace in Canada.
"It doesn't take a lot to heat or cool a tiny home and, quite often, the appliances are smaller and use less power," King says. As a result, tiny home owners are rewarded with some major savings on a month-to-month basis when it comes to utility costs.
Appliances: About the same
Owners of tiny homes might be in for a surprise when they need to upgrade or replace their home appliances, King explains. Oftentimes, low-energy appliances need to be shipped in from European manufacturers and are costly.
But starter homes aren't immune to costly replacements, either: "Quite often, starter homes will need updates or repairs, and, like all homes, utility costs will be much higher than those seen with a tiny home," she says.
An old furnace can cost $3,000 or a refrigerator that decides to retire could be $2,000. Those costs add up quick, King points out.
For those planning to invest in a starter home, it's a good idea to put aside an "annual maintenance budget," especially if you're buying an older home, King suggests.
"The key to buying a starter home is to anticipate when upgrades need to be done, and factor in those costs when you put in your offer," King says.
Storage: Starter homes have an advantage
Neatly arranging a tiny home with all of your necessities is a real-life game of Tetris. If you're enthusiastically embracing the minimalist lifestyle that goes along with tiny home living, you may be able to get all of your belongings to fit into a few hundred square feet. However, when there's a lot you can't purge—and you don't have a utility closet, basement, or garage like many starter homes have—you commonly need to factor in an extra $100 a month or so for a storage unit. The monthly fees may be negotiable, but renting a storage unit comes with extra costs you might not have thought of, such as insurance, administrative fees, and lock purchases.
HOA costs: Tiny homes can often duck these costs
The chances of belonging to an HOA are far more likely if you're moving into a starter home. Of course, you'll know exactly how much HOA fees cost when you move in. But, those monthly fees can increase and you can get sucker punched with HOA assessments (in which your HOA will pool funds from residents to pay for an upgrade or repair) every now and again. In my own starter home experience, I moved into a new townhome development and my HOA fees started at $150 per month. They've since climbed up to $230 a month because costs were underestimated in the beginning. Over the course of a few years, I've been hit with about $6,000 in assessments for projects like hail damage repair (partially covered by my insurance), the removal of a tree, and paint jobs.
Tax breaks: Starter homes will nab these deductions
A tiny home is not considered real estate if it's not permanently attached to the ground. Because of this, tiny homes miss out on some of the tax deduction benefits traditional homes are eligible for, explains Shawn Breyer, with Breyer Home Buyers, a real estate company in Atlanta, Georgia. "Tax deductions are a great reason to make an investment in real estate and can account for thousands in tax savings annually, and can even negate your tax liability completely," Breyer says.
The cost to park: A unique expense to tiny home living
Brynn Burger and her family (husband, two kids and a dog!) scaled down from a 2,200 square-foot, two-story home to a 300-square-foot gooseneck trailer (she blogs about the experience at The Mama on the Rocks). In all, her family's monthly expenses dropped from more than $3,000 a month to just over $1,000 a month—including house payment, land rent, sewage dumping, insurance, vehicles, and phone.
But, if you're toying with the idea of joining the tiny home movement, know this: "There are actually a lot of expenses that tiny home buyers wouldn't think about unless they had either lived tiny before or had sincerely researched these hidden costs," Burger says.
A big charge? Paying to park. Burger found that in most states, the average cost of a long-term spot with electric and water hookups is in the $600 to $900 range. In more popular areas, it could cost you up to $1,200 a month. Her family has been able to temper expenses because they found a spot on agricultural land near her husband's job, and pay $400 a month for a 20-acre farm that includes water, electric, parking, and trash.
The cost of moving your home: Another distinct tiny home expense
Either paying a professional hauling company to move your home or investing in a large truck to pull your home is another tiny living cost you don't want to overlook, Burger says. If you're going at this on your own, you'll also need a hitch. Her family purchased a used 2008 F250 diesel truck for $25,000, plus a gooseneck hitch for an additional $800. Her husband installed it, which saved her family on labor costs.
"You also need to include the cost of tires and regular road wear and tear if your tiny home is on wheels and you plan to move it," she says.
Resale value: Starter homes win out
A starter home, such as a townhouse, appreciates over time, explains Evan Roberts, a real estate agent with Dependable Homebuyers in Washington, D.C.
"Tiny homes are less expensive but do not hold their value the same way as a starter home," he says. They have a shorter lifespan due to the type of construction."
Also, if you underestimate how long it will take you to grow out of a starter home, you can still make your investment last longer than you could a tiny home, points out Allison Chiaramonte of Warburg Realty. Renting out or selling a starter home is far easier because the pool of potential tenants is bigger.
"Most tiny homes are incredibly specific and customized to their owners' needs," Chiaramonte adds. Because of this, it might take awhile to find a new buyer. Thus renting out or selling a starter home is far easier because the pool of potential tenants is bigger.
Burger says the return-on-investment question is a bit tricky. The majority of tiny homes built by builders are certified as RVs so they devalue as soon as they pull off the lot, much like a vehicle does, she says. So for her, joining the tiny home movement wasn't about "property investment." (And, in case you were wondering, no one in her family misses the "stuff" or the space).
"This choice was an investment into our family—into our kids," she says. "This affords us to be a one income household so we can spend so much more time together and that, to us, is worth the risk."