Nowadays, travelers prefer to stay in unique places on vacation, from glamping to staying in igloos; they want to experience something out of the ordinary and something that is perhaps unavailable in their hometown. That’s where tiny house vacation homes come in!
The first tiny home reported was lived in by Henry David Thoreau in a 150 square feet cabin in Massachusetts whilst writing his novel Walden. Fast forward to the 21st Century, tiny houses surged during the 2008 mortgage crisis, causing homeowners to scale down. In the present day, it’s a popular movement and trend. Travelers love it and tiny homeowners should too because it’s an excellent money-making opportunity.
Having a small house doesn’t necessarily mean you have a tiny house. The tiny house industry has been clearly defined in recent years so to segment the trend accordingly with appropriate categories on listing sites. Tiny houses are downsized homes that are typically between 100 – 400 square feet in size. They are all about simple living within a smaller context.
Although tiny, these miniature homes are still designed to pack a punch. It should be as fully equipped as possible, including a bathroom and kitchen area. There needs to be a distinguishable difference between your tiny home and a camper van. Think: normal home, but make it small!
Is renting out tiny houses profitable?
If you’ve done any research into what it’s like to run a vacation rental business, then you know that owning a short-term rental property can be time-consuming. Obviously, the part that makes it worth it is the income! Managing a tiny house vacation rental can be profitable if done right. The difficult part is determining when a tiny home is profitable and when it’s a sunk cost.
The first thing you’ll need to consider is the investment. If you’re taking out a high-interest loan or you’re only putting down a small sum of money to start, you need to be prepared for the cost to outweigh the profit. Be realistic about how much loss you can afford because tiny house vacation rentals, like any other investment property, might take some time to turn a profit.
Plan, plan, plan! We’ve said it before and we’ll say it again: never go into an investment blindly! Some people are wrongly convinced that tiny home vacation rentals are easier to manage than a bigger property, but it’s still a full-time business operation, regardless of the size. Having a vacation rental business plan in place before you open your little doors to guests will set up your property for maximum profitability.
Pros and cons of a tiny home vacation rental business
The tiny house movement is growing rapidly in the United States and is a perfect business opportunity for any budding vacation rental owner. Despite its smaller size, it’s still a big investment, which is why we’ve outlined all the pros and cons of owning a tiny house vacation rental. Is a tiny home the right investment for you?
Pro: They are not limited to one type
One key benefit of tiny houses is that there is a wide variety to choose from. Before starting in this industry, you need to think about what kind of home you wish to have. Many owners opt for a mobile tiny house to keep the location interesting or put it on a permanent plot of land.
Your tiny home can be more than just a box! If you want to get really creative, you can renovate a no longer in-use train carriage, or an old school bus. You can even use a shipping container! A small cabin in the woods, a shed in the garden, a cave, the list is endless. As tiny houses occupy less space, you can choose any type of home and have fun with making the place resourceful!
Tiny houses don’t necessarily have to be on placed land; the sea is an option too. A houseboat or a normal boat is a great way to attract visitors who wish to experience life at sea on a smaller scale.
Decide which tiny house would best suit you and your business. It’s also a good idea to see if there is a high demand for vacation rentals in the chosen area to start your business. Know how to target your vacation rental to certain types of travelers, such as fitness and wellness travelers and millennials. Also, be aware of SEO hacks to ensure that when guests are looking for a vacation rental, they will be able to find yours straight away.
Con: A tiny house property value isn’t always fair
Sometimes when real estate appraisers and investors assess a tiny home property, the value can be severely underestimated. This is especially true if you don’t have a permanent plot of land to accompany your home.
Property value takes into account a number of factors such as the market, land value, size, improvements, and depreciation. These are all good indicators if you’re managing a standard vacation home but can sometimes grab an inaccurate depiction of value when it comes to tiny homes. If you’re planning to resell your tiny home in the future, remember that the value is in its rentability and less for reselling.
Pro: You can build them yourself
68% of tiny house owners don’t have a mortgage. There’s no need to spend a fortune or go through your savings. Building a tiny house is easier and cheaper than ever before.
The majority of tiny houses commence as DIY projects. You don’t have to be an expert, you just need to be creative. By using less building resources, recycling and reusing materials, there are many inexpensive ways to build and refurbish your vacation rental.
Do you have an old van that isn’t in use anymore? Redecorate and convert a camper van into a living space. Tiny homes are not only affordable but also not too pricey to build. However, if DIY isn’t in your area of expertise, already built tiny houses are available to purchase online. What’s even better, by spending less money building and buying them and then renting them out, the turnover profit will be much higher in a shorter amount of time.
55% of tiny house owners have more savings than the average American. How about starting it as a fun project during your leisure time? Do it with friends or family on the weekends. You can even get the kids involved with painting!
Con: There’s maintenance involved
There might be less physical space to have to clean and repair, but some of the maintenance involved in managing a tiny home property can actually be more time-consuming than your average vacation rental.
Let’s take the bathroom, for example. A typical vacation rental would have standard plumbing installed and you’d pay a monthly expense for the utilities with the occasional need for repair. Tiny homes, on the other hand, typically do not have standard plumbing fixtures nor the capacity for it. Compost toilets, foot pedal sinks, and water supply all amount to a lot of work to keep your bathroom fully functioning for guests.
Pro: They offer mobility and flexibility
Where can you build a tiny house? Well, anywhere really! The great thing about tiny houses is that there is no fixed location.
They can be portable too. If your tiny house is a trailer with wheels, you can place it anywhere and change the location as much as you wish! You can even advertise on your listing that guests can choose from a number of locations. How about the beach? Or in the woods?
If you want to have your vacation rental within close proximity, you can even build it around your home property. If you have a garden, consider placing it at the bottom. Furthermore, you can get really creative and build a treehouse to use as a tiny house.
There are houses available that are easy to assemble and reassemble, meaning that if you prefer to only rent your vacation rental during summer, you can put it away quickly for the low season.
Remember to revise licenses and taxes when renting your tiny house vacation rental to avoid any problems with land and property regulations.
Con: Financing options are limited
The world of investing and banking isn’t always as up on trends as the real estate market or vacation rental industry. We might see a houseboat, treehouse, or old school bus as an entirely liveable space, but some loan officers may not, meaning that financing can be tricky.
If you know that you’ll need financing to purchase your tiny house vacation rental, be prepared for alternatives. Having enough money to put down or showing your intended business plan might help you to get approved for a loan. If you still need more help with loan approval, check out these ten tips for financing a vacation rental home.
Pro: A great first step for new vacation rental owners
According to a survey by the National Association of Home Builders, 53% of Americans would consider living in a home that is less than 600 square feet. The demand is there and the ability to enter the vacation rental market with a tiny home is relatively easy, making this a great option for first-time vacation rental owners.
Managing a tiny home vacation rental can be less overwhelming than a full-sized property. Themes are simplified, rooms aren’t complex, and the space itself is far more manageable. Likewise, with amenities, you don’t need to go overboard. Plus, Tidying up will take only a fraction of time after each guest turnover.
If you are concerned that you won’t be able to fit everything in, that it literally is too tiny, consider building two floors in your tiny house. By using a wooden board and ladder, you can easily squeeze a bedroom above the kitchen or living area.
As the property is smaller, this is a perfect opportunity to decorate the surrounding area. By including some outdoor furniture, a barbeque, and sun loungers, guests can enjoy the exterior just as much as the interior. You can even include some activities, such as a ping-pong table or a basketball hoop. Owning a tiny home can be not only easier for newcomers but also a fun first project!
Con: Legal gray area for tiny house vacation rentals
As many trendy things go, there aren’t many established rules and regulations in place for tiny homes. This can be good in the sense that there isn’t any specific tax or tight regulations for managing your tiny home business, but it could be detrimental in the future.
Let’s say your tiny home isn’t currently anchored to one location. There could be a law in the future that prevents you from operating a mobile tiny home business that would threaten the core of your operation. Be prepared for changing laws and regulations, but also be ready for this to shift the mission of your vacation rental business should stricter tiny home regulations arise.
Pro: They’re environmentally friendly
Tiny houses are associated with being eco-friendly and sustainable. Water and electricity bills particularly decrease, as they conserve much less energy than an ordinary home. It’s no wonder that tiny houses reduce ecological footprints by about 45% on average. There are many things you can do to really make it even more environmentally friendly.
As tiny houses minimize space, household waste ought to do the same. Allow your guests ways to recycle. Include recycling containers and compost for food outside, allowing food waste such as banana peels to grow into the soil. Build solar panels on the roof, conserve power and electricity. Want to save water? Collect fresh rainwater that can be used for showers and taps. Include eco-friendly items in your vacation rental, such as bamboo toothbrushes and reusable coffee filters.
Many travelers find it hard to be sustainable whilst on vacation. Think about it; hotels provide all those unnecessary plastic bottles. Travelers love the idea of sustainable living and often, it’s difficult to do whilst traveling. By mentioning all the ways your tiny house vacation rental is eco-friendly, your listing will for sure stand out and appeal to travelers.
The housing crash of 2008 paired with the Coronavirus pandemic, shed light on alternative accommodation options for many different types of travelers. Going off the grid in a simplified space now has quite the allure, as shown by the booming tiny house trend. Small in size but mighty in profits, a tiny house vacation rental might be the right move for your business, but be sure to weigh out all the pros and cons before making a decision.
Owning a tiny house is loads of fun but equally as exhaustive as a full-sized home. You’ll need good vacation rental software to manage the large amount of reservations you’ll receive for your tiny home. Create a stunning website for your tiny house, or take advantage of our built-in reservation management system. Try out our tiny house vacation rental software today with a free 7-day trial.
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