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

Adorable Tiny Home in HawthorneOne of the options that single-family rental home investors have to maximize their earning potential is to add units, specifically tiny homes, to an existing property. The tiny house movement, which began with people wanting a simpler and more meaningful life by downsizing their living space and reducing their “stuff”, has grown into a legitimate investment opportunity. But just because it’s gaining ground, it doesn’t mean that all investors ought to join in. A tiny home may not be a good— or even legal— option right now. So, before you make the decision to add a tiny home in Hawthorne, it’s critical that you find out as much as you can about it. Find out about both its potential and risks.

There’s no question that projects that increase your rental income while adding to the value to the property are worth studying. And, on its face, it does seem like adding a tiny home to your rental property is a good way to attain both. So, what exactly is a tiny home? The widely accepted definition is that a tiny home is a detached dwelling that is under 400 square feet. They can have wheels on them, like an RV, or built on a permanent foundation.

There are a lot of people looking for affordable rental homes. This has been mainly spurred by the high housing prices across the country. When you add to this the growing interest in a downsized lifestyle of fewer possessions and a smaller environmental impact, then its clear that tiny rental homes are one housing trend that renters in many markets will welcome. When you add a tiny home next to an existing rental house, you are offering investors the opportunity to increase their rental income without the costs of buying another property. And often, 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 things you need to look at before building a tiny home on your rental property, however. The first thing you should look at its cost. It may be a small structure but tiny homes still cost anywhere from $30,000 to $180,000. This indicates that no matter how economical or inexpensive a tiny home can be, it will still be a large financial investment. With this likely obstacle in your way, the reality is that looking for financing for a tiny home may be a tedious task. Many lenders do not offer mortgages for tiny homes, and if you go for other types of loans, you may end up paying higher interest rates.

In addition to the cost of building a tiny home, you’ll have to contend with regulatory issues as well, which means taking the local zoning regulations and building codes into consideration. In many areas, there are strict zoning laws that prevent property owners from adding rental units to a single-family property. Some even have regulations that prescribe the size of a detached dwelling. It needs to be big enough 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 likewise, tiny homes meet the same requirements as any other house. There could be permits, inspections, and utility service work required, all adding to the cost of construction. This shows the importance of doing a little research on city ordinances and building codes in your area.

It is even vital to take into account how your tenants will feel about a tiny home. If ever you have long-term tenants in your rental home, they may be neither glad nor eager about a second dwelling on the property. Adding another unit adds people, cars, and increased activity around the house. It may also lead to disputes and other issues. Although these unfavorable reactions aren’t certain, you should still play it safe and take the needed steps to understand your current tenant’s needs before making your decision.

Lastly, while a tiny home may add value to your investment property, the way they appreciate it isn’t the same as how traditional houses do. This is especially the case for tiny homes on wheels. Instead of appreciating in value, these homes are counted as depreciating assets and won’t grow in value like the land and other structures likely 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 that making the decision to add a tiny home to your investment property can be difficult. It’s a good idea to know a lot beforehand. This will prepare you for success no matter what decision you make. If you have decided to commit to these plans, keep in mind that a Hawthorne property manager can offer you valuable services and tools that will help you be successful. Give us a call at 310-928-9728 to learn more.

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