11 Hidden Costs of Buying a Tiny House That No One is Talking About

LOANS - MORTGAGES
Buying a tiny house might not be the cost-saving measure you think it is, especially once you consider these expenses.
Updated April 14, 2023
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On the surface, tiny houses might seem like the obvious solution to an inflated, volatile housing market. 

They’re less expensive to build than traditional houses, take up less space, and lend themselves to a downsized, easygoing lifestyle. What’s not to love?

But although tiny houses might be more affordable upfront, they can come with hidden costs that take a bite out of your budget.

To avoid wasting money on a tiny home purchase, make sure you can afford these 11 common tiny-house expenses.

Expensive building materials

Tomasz Zajda/Adobe small woodwork job

Thanks to ongoing issues such as supply chain breakdowns and rampant inflation, building materials are both harder to acquire and more expensive to purchase than usual right now.

As a result, the materials alone for your tiny house could cost tens of thousands of dollars.

The need to purchase land

nikkytok/Adobe land for sale sign against trimmed lawn

Some tiny houses are built on wheels, allowing the owners to move them from place to place. Others are built to stay put in one location.

If you want your tiny house to remain in one place, you’ll need to either purchase or rent land to build it on.

Extra expenses related to your area’s zoning laws

PaeGAG/Adobe architect working at his desk

Even if you already have a spot in mind for your tiny house, local zoning laws might cause issues. You must follow local zoning laws and acquire the right permits before you build and place your home. 

That can be expensive, but failing to adhere to zoning laws will likely land you with hefty fines, and might require you to move the tiny house.

The cost of towing a mobile house

ANDREW NORRIS/Adobe caravan on the road

If you’d rather have a mobile tiny house than a stationary one, you’ll need to figure out how to move the house from place to place.

You will need a truck that has the proper towing capacity to move a tiny house. If you do not own such a truck, you will either need to rent one or pay someone else to move the tiny house.

Pro tip: Even if you downsize to a tiny house, expenses will not disappear. So, if money is tight, consider ways to increase your savings and grow your wealth so you will be ready when the next unexpected bill related to your tiny house appears.

Wear and tear when moving the house

Ivan Kruk/Adobe plumber

An overlooked factor when moving a house is that it experiences a lot of wind and vibrations during the journey. This can take a toll on the house.

In addition, you can damage the house in transit if highway debris strikes the home, you hit a pothole at high speeds, or — in a worst-case scenario — you are involved in a crash.

Such damage means you might pay maintenance costs to bring your house back into peak condition once it arrives at its new locale.

Utilities

Pixel-Shot/Adobe electrician repairing air conditioner indoors

Tiny homes come with many of the same costs as traditional homes, starting with utilities.

On the one hand, you won’t have as much space to heat or cool in a tiny home, which could hypothetically cut down some energy costs. But you still likely need electricity, water, and other services.

If you’re planning to live largely off the grid, you might also need to pay for satellite internet service, solar panel installation, and a rainwater catchment system.

Homeowners or RV insurance

Daenin/Adobe real estate agent showing calculator with mortgage amount to client with house sculpture and papers on table

No matter how tiny your house is, it’s a good idea to protect yourself by purchasing insurance. Even a 100-square-foot house is still likely to cost thousands of dollars, and that’s an investment worth protecting.

Additionally, if you require a loan to purchase a tiny house,your lender might not approve you to borrow unless you have homeowners insurance — or, if your tiny home has wheels, RV insurance.

Loan costs

Freedomz/Adobe estate agent and customer shaking hands

Speaking of loans, don’t assume you can get a mortgage loan to finance your tiny house. Many lenders have minimum mortgage loan amount requirements — such as $50,000 or more — so your tiny house’s lower cost could actually disqualify you from a mortgage loan out of the gate.

Even if you qualify for a loan based on the amount, you might have to meet other requirements for a mortgage, such as owning the land you plan to live on or building your tiny home with a foundation.

If you can’t secure a mortgage, you’ll likely have to consider options such as personal loans or RV loans instead, which can be more expensive.

Possible depreciation

Who is Danny/Adobe red arrow going down on golden coin stacks

Traditional homes typically appreciate in value over time. That might not be the case with a tiny home.

Far fewer people are interested in purchasing a tiny home than in buying a traditional home, so reselling your tiny home isn’t a given, much less selling it for a profit.

Plus, the more customized your tiny house is, the more your resale market shrinks. It is even possible for tiny homes to depreciate in value.

The need to invest in new, smaller appliances

Shi/Adobe air fryer

Since tiny homes usually are between 100 and 500 square feet, you can’t expect to fit a typical washer, dryer, fridge, stove, and dishwasher inside with much room left over.

Instead of moving your current appliances into your newer, smaller abode, you’ll need to invest in small, compact appliances that are custom-made to fit tiny houses.

Rental costs for a storage unit

seanlockephotography/Adobe adding lock to unit door

In theory, having a smaller house is the perfect way to force yourself to declutter. In practice, though, you might struggle to downsize as drastically as a tiny house demands.

Plus, after your initial decluttering, you need to stick to a strict minimalist lifestyle if you don’t want the space to fill up fast. Otherwise, you might have to add a storage unit to your list of monthly expenses.

Bottom line

Halfpoint/Adobe young family with small daughter indoor

Tiny houses have plenty of upsides, from their smaller carbon footprint to their emphasis on simplicity. But you shouldn’t expect to sell your current house, move into a tiny house, and suddenly eliminate all housing costs.

Instead, look at your budget and thoroughly weigh the pros and cons of your decision before adopting the tiny-house lifestyle. 

A move to a tiny house might help you lower financial stress in some ways but don’t overlook the money challenges that can come with living in one of these homes.

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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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