Tiny homes have been growing rapidly popular this year. However, many wonder if tiny homes are reasonable. Typically, people buy a house with a plan to turn it into an investment and make a profit. But can you hold on to the same plan with a tiny home?

So, do tiny homes hold or lose value? 

Unfortunately, tiny homes depreciate at the same rate as mobile homes and cars lose value.

A tiny home could hold (or appreciate) value only if it happens to be unique that there is a high demand for it (like a collectible car), which is very unlikely. On top of that, you also need to keep it in peak condition over a long period. 

But why exactly do tiny homes lose value? And when it comes to appreciation and depreciation, how do tiny homes and small houses differ? 

Why Tiny Homes Lose Value

Tiny homes are basically houses on wheels. With that in mind, they are similar to RV or a trailer, and banks treat them as such. 

Automobiles don’t last long as much as homes. The longer they are used, the more run-down they get, meaning if you put them back up for sale, they will make less, if any, profit. 

Technically speaking, tiny homes are vehicles. And vehicles, as we all know it, depreciate in time. Sadly, tiny homes depreciate faster than any vehicle. That’s because unlike cars that you only use for driving, you don’t just drive around in your tiny house, you live in it. 

Do Tiny Homes Hold or Lose Value: Wear and Tear

If you live in a traditional house, you’ll eventually notice little damage here and there. You might see a scratch in the paint, stains on your carpet, or a dent in your marble countertop. 

These things can be easily overlooked if you live in a big house, especially if you always take good care of your home. It’s hard to avoid wear and tear. 

The same is true with a tiny house. But unlike in big houses, damages in tiny homes are visible. Because you have a smaller space in your tiny home, “little” damages may look so much bigger. 

There’s also another problem with living in a smaller space. The smaller the room is, the messier it will look. Also, there’s not much room to spread out without the chance of punching a hole in the wall. 

A tiny home can easily look dirty, damaged, and crowded. And if you try to sell a home like that, how much profit do you expect?

Tiny houses are also not intended to withstand a lot of weather. RVs and cars can last long only if you store them in a garage. And if that’s the case, they usually depreciate slower. 

This applies to tiny houses, as well. But of course, you intend to use your tiny home, not just to store it in a garage. Chances are, you will be driving around the country with your tiny house, have a blast, withstand heavy rain, snow, wind, hail, or even falling rock. 

That tiny house of yours will surely experience a lot of wear and tear, and eventually, you will have to start looking for a new home.

But there’s still a problem… you will have a hard time selling your tiny house to finance your new search, and that’s because you possess damaged goods. 

Sure, people don’t like to buy a damaged tiny house that’s been zipping the road and got beaten by rather devastating hail storms. 

Do Tiny Homes Hold or Lose Value: Banks and Loans

You also need to consider how banks see tiny homes. Most people turn to banks to get loans to buy or build a house. Banks usually hand out loans if the blueprints, payment plan, and credit score look excellent.

Banks don’t invest money into things that they know that won’t outlast them. They only invest in things they know that will pay off. And for them, tiny houses are not worth it. 

You also need to consider how banks would see someone who wants to get a loan to buy a tiny home. Chances are, the bank will think that you aren’t in a situation to pay the loan back. In case you aren’t able to pay your obligations, they can’t flip your home and sell for a profit. 

Banks are more likely to approve loans to rich people with good credit scores. And if you’re rich, then you won’t be needing a loan anyway, so this case is just a fiction. 

The Differences Between Tiny Homes and Small Homes

Small homes and tiny homes have a lot of differences. 

And this section forward will explain their financial, physical, and functional differences.

Tiny Home VS Small Home: Financial Differences

Tiny Home

As discussed above, tiny homes, like cars, RVs, trucks, trailers, and boats, depreciate as time goes by. And one of the main reasons is that tiny homes get worn out over time, aren’t a safe investment for banks, and aren’t as durable as traditional houses. 

And it’s not only banks who have a strong objection against tiny houses but also insurance companies. Tiny houses are a hard sell for these companies to shell out insurance for. And if in case you’re able to convince them, the monthly payment will be extremely enormous anyway. 

Tiny houses are fragile, especially that they are more susceptible to damage both from weather and damaging effects of simply driving it around. 

The chances of your tiny home to get damaged or destroyed are pretty high, which means there’s a high possibility of the insurance company to pay you. Something as simple as a hail storm could lead to the insurance company paying you a lot, and that’s something they don’t want on their plate. 

And for insurance companies, tiny homes are far worse than cars. Cars are also relatively fragile, but then again, unlike tiny homes, you don’t actually live in them. 

When you live in a place, the chances of that place getting damaged exponentially increases. And besides, it’s not like you’re only going to store your tiny house in your garage, where it would be protected against hail storms, thieves, and vandals. 

And remember, when you hit the road with your tiny house, the risk of a crash significantly increases. 

In 2013, the motor vehicle deaths totaled 33,804 for a death rate of 10.7 per 100,000. And the odds of an American driver dying as a result of automobile crash is 1 in 77, according to data. 

This is to say that anyone on the road is at risk of road accidents. Collisions can cost insurance companies thousands of dollars. So several companies just avoid insuring tiny houses. 

Small Home

The price of building tiny houses and small homes are almost the same. The average cost of building a tiny home is anywhere between $15,000 to $23,000. Small houses, however, can cost a bit higher, considering you have to purchase a property and lay a foundation. 

Still, small houses are far cheaper than an average home (approx. 2,500 sq. ft.) that costs anywhere between $210,000 to $310,000. 

Unlike tiny houses, you can insure small homes (and insurance companies are willing to do so). Small houses are more durable and can last longer. They could even be around for generations (i.e., several small stone houses have been around for centuries. Check this out!)

Insurance companies see small houses a safe investment. Apparently, banks and insurance work hand in hand. 

If you go to a bank to ask for a loan to build a small house, you’ll likely to exit the bank with a huge amount of money in your pocket (provided, of course, that you have a good credit score, practical payment plan, and reasonable building plan). 

For banks, small homes are a much better investment. Plus, they know that small homes are much more durable and appreciate in market value (as long as you take good care of them). 

Small houses are also easier to remodel, update, and repair with a much better result. And if you add a garden and lawn, it would have an added appeal. Since small houses are immobile, the house and its inhabitants can contribute to a community, which also helps with appreciation. 

Tiny Home VS Small Home: Physical Differences

Tiny Home

The average size of a tiny house is about 500 square feet and are usually no bigger than 20 by 8 feet. Tiny houses usually have 120 square feet of living space. 

Tiny homes are intended to be only this tiny, so they can be easily transported from one place to another. Some tiny houses are simply perched on a trailer and towed to different places, depending on the season. 

Most tiny housers equip their homes with furniture and fixtures that have dual purposes. The couch can also be used as storage, and the stairs could also be a drawer. You get the idea. 

But sometimes things with dual purposes aren’t always practical. For one, you usually cannot use both of its purposes at the same time. For example, a couch could be turned into a bed. But you can’t use both purposes at the same time.

Since you want to save space, almost everything in your house has a purpose. While there are some that like a minimalist lifestyle, many start to feel overwhelmed by it after some time. 

The limited space in tiny houses makes it hard to decorate and keep sentimental items, which could be an issue for some people. 

But there’s a silver lining that we tend to overlook. The tiny house lifestyle inspires us to keep only the things that we really need. Plus, you can build your tiny home to fit your every need for a relatively affordable price. 

Small Home

Small homes can be the same size as a tiny house, but they are usually as big as 1,500 sq. feet. 

And unlike tiny homes, small houses have a foundation and are affixed on a piece of land. You could build a garden, porches, and even a basement. 

When it comes to decorating, you’ll have more freedom in small houses. You can use items without the need for dual functionality. You can keep sentimental items like pictures, centerpieces, and that huge wooden closet you got from your dad. 

Tiny Home VS Small Home: Functionality Differences

Tiny Home

Unlike small houses, tiny houses are marketed as a way to live a conservationist lifestyle. This has a lot of merits. You can use solar panels and hook up to a generator to power up your tiny home. Self-composting toilets are also a great way to conserve water and “go green.” 

You’ll also have a lesser carbon footprint if you live in a tiny home.

And if you’ve been wanting to live a nomadic lifestyle, then a tiny house is a good option. They are typically on wheels, meaning you could go anywhere you want to go. 

Tiny houses on wheels allow you to explore various places and cultures without having to commit to staying anywhere. 

Other great things about tiny houses are there functional kitchens and bathrooms. A tiny kitchen can have dishwashers, ovens, stoves, toilets, sinks, showers, etc. It’s like living in a house, but smaller.

But worrying about the weight of your tiny home is a setback, at least to some people.  When you need to travel between states, you need to weigh your trailer on a scales. And there could be fines if you exceed some pounds than what’s only allowed. 

So, if you’re thinking about the tiny house movement, then you need to think about everything that you’re going to put into it. Are you ready to let go of some of your valuables? 

And because weight is a major concern in tiny houses, you have to contemplate your design — both interior and exterior. Like, choosing between a porcelain sink (which looks undeniably fancy) and a stainless steel sink. 

That’s not the only concern. Since your tiny house is not situated in a permanent spot, you will have to find a place to park it wherever you go. 

There are already a lot of RV parks or trailer parks in almost every state. However, the parking fee is usually as much as spending a week in a hotel. 

Small Homes

When it comes to carbon footprint, size does matter. Basically, the smaller your house, the lesser carbon footprint you’ll have. 

And because small homes are (mostly) the same size as tiny houses, it takes less to heat, cool, and power it. Like tiny homes, you can use solar panels and generators to power your small house.

Small homes, since they are perched in a permanent spot, could easily hook up to water, electricity, and even the internet. 

You can also contribute to the community if you have a small house. When you stay in a place for a long time, you get to know your neighbor and the culture around you. 

With a small house, you don’t have to squeeze yourself in a loft or use a fold-up kitchenette because you now have a full-size kitchen. 

Hold up! The fun doesn’t stop there. Unlike tiny houses, you can expand your small home. A tiny home may not be able to accommodate a growing family. 

Final Thoughts

Tiny homes depreciate like cars and RVs, while small houses appreciate in market value. While this may be a major setback, there are still a lot of things tiny homes offer that small houses don’t, such as being able to go greener, live a minimalist lifestyle, and being able to live a nomadic living. 

Related Questions

How much does it cost to live in a tiny house?

Living in a tiny house can cost anywhere from $10,000 to $200,000. 

Can you legally live in a tiny house?

If your tiny house is on a foundation, you must follow the same building codes as residential homes. Tiny houses on wheels may fall under the recreational vehicle code.