Is It Worth Renting to Own a Tiny House?

The Tiny House Movement is for anyone that wants to live a simpler life.

Living in a Tiny House has many benefits, such as living a minimal life and decluttering your home and mind, a substantial decrease in the overall cost of living, and finally, reducing your footprint in environmental impact.

And while it has so many benefits, it is still an investment that you should be sure of before diving in headfirst.

One way to make sure that you’re ready for a commitment like living in a Tiny House is by signing a lease-option agreement.

There are not many renting options for Tiny Houses other than those run as a hotel, which can be expensive.

Some Tiny House hotels run about $93 a night, which could add up to over $2,000 a month. So, renting to own is simply the only option for renting. But is it worth it?

How Much Does It Cost?

The cost of your Tiny House depends on the type that you are renting, buying, or building.

Overall, the cost of a completed Tiny Home could range between $20,000 to $60,000 – about the same price as the average vehicle and a steep decrease from the cost of a traditional house.

Because it is substantially cheaper, your monthly rent payment will also be very affordable – ranging between $150 to $500!

The Down Payment will rely heavily on your credit score, mainly because Financing and Insurance companies see this as a risk.

So, the Down Payment will range between 2% to 5% of the final cost, and the more you put down – the better.

But again, the price will range depending on how you decide to get into a Tiny House.

Tiny House Shells. This is essentially the frame of your Tiny House; it includes your doors, windows, siding, and roof, but you get to build and design the inside to best fit your life. It also cuts substantial labor costs because more time is spent building the interior than the exterior.

Transitioning a Storage Shed to a Tiny Home. The benefit of this is that the exterior is already built, unlike the Tiny Shells, but the interior needs to be built. Some storage companies will lease for up to three years. The Down Payment for these homes ranges from $300 to $1000.

Finding an Owner That Wants to Sell. Tiny Houses can be hard to sell, so it could be even cheaper if you find an owner that has had their house on the market for a while. Often, these will be priced below the market value for an already cheap housing option.

The seller might be open to a rent-to-own arrangement. It offers the seller extra money every month and a potential sale at the end of your agreement.

Besides the cost of the house itself, many Tiny House owners save money on electricity, some as low as $25 a month and maybe more if you decide to use Solar Panels.

You also save money because a smaller house means less room for extra stuff that you don’t genuinely need.

How Does Rent to Own Work?

Rent to Own means that you rent a home for a set amount of time before buying the home to try out the house or buy enough time to boost your credit score.

There are two types of lease agreements that pertain to Rent-to-Own:

Lease-Option. This allows you to walk away from the agreement with little to no impact on you, legally or financially. However, any investment you put into maintaining or aesthetically adding to the Tiny House is lost.

Lease-Purchase.  This agreement requires that you buy the Tiny House, and opting out could end in a legal fight that you will not win.

In both contracts, you are required to pay a down payment up front and a higher than market price rent for some of it to be saved for your down payment down the line in the purchase process.

Failure to pay rent on time is a breach of contract, and you could lose the investment money you had put in.

Additionally, in any rent-to-own agreement, the maintenance and upkeep are the buyer’s responsibility.

This gives the buyer a better idea of the quality of the home and can help them decide whether this is a good investment for them.

The most common reason for agreeing to a Rent to Own contract is because the buyer does not have sufficient credit to apply for a mortgage.

If you have no or particularly bad credit, it could result in having to pay a heftier down payment and a higher interest rate.

ℹ️ Did you know that 68% of tiny house owners have no mortgage?

What Are the Pros and Cons of a Tiny House?

The Pros of a Tiny House heavily outweigh the cons if you’re the type of person or family that wants to live minimally. But let’s take a closer look.

Pros

Financial Benefits.

• Cost less than a car.
• Same quality as most houses
• Save money on utilities
• Save on Property Taxes since a Tiny House on Wheels is not a permanent part of the land.
• Renting land is cheaper than renting an apartment or house.

A Simpler Life

• Forced to live a simpler life
• Less cost of maintenance or “upgrading” your stuff
• Stress relief from a life you didn’t realize was causing stress.

Benefits the Environment

• Fewer utilities means a smaller impact on the environment
• Ability to go “off-grid.”
• Less consumption means less trash and waste going to landfills.

Cons

Difficulty Finding a Place to Put Your Tiny House

• Codes Vary from place to place (municipalities, cities, and states)
• Codes stating that you can’t “live in a vehicle for more than 30 days” and Tiny Houses on trailers are considered RV’s
• If on a foundation, building codes dictate the minimum square footage, limiting the possibility of a Tiny House.

Limited Opportunity for Financing and Insurance

It’s a risky investment for financing and insurance companies because they’re unsure of the value and stability of a Tiny House.

Impact on Your Relationships

Communication is vital in any relationship but more so if you live in a Tiny House because there is no place to clear your head in an argument.

Additionally, asking for space is hard in such a small space. It is possible to live in a Tiny House with your family, though, but it is hard.

So, tell me, with all that you know now, is it worth pursuing a rent-to-own agreement for a Tiny House?