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Why Buying a Tiny Home Is Perfect for My Tiny Budget

Tiny houses are budget-friendly alternative living spaces in an unaffordable market, even in cities like LA.

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As a single woman in my early 40s, I’m drawn to tiny homes for several reasons. Sure, I yearn for the “soft life” free of stress and hustle, but the biggest selling point is affordability. 

Since I’m starting to think about retirement, the looming question is whether I’ll ever be a homeowner. I currently live in Los Angeles, where the median price for a home is over 1 million. With home prices so expensive and mortgage interest rates so high, conventional homeownership feels out of reach. 

A tiny home fits a tiny budget. Aside from being better for my finances, a tiny house would be more in step with my minimalist lifestyle and would allow me to potentially uproot and relocate as needed. 

As my interest in tiny homes grows, it turns out I’m in good company. A recent survey revealed that 73% of Americans would be open to living in a tiny home, in large part because the current housing market is so unaffordable

I wanted to find out how perceptions of tiny homes are changing, why they’re becoming more popular, and if it’s a good fit for someone like me. Here’s what I discovered. 

Tiny homes are for a lot of different folks 

The tiny house movement began in the late 1990s as somewhat fringe, but by the early 2000s it started to capture the mainstream as it spread to social media platforms, reality TV shows and documentary films

Tiny homes are known for attracting people who want to live a simple life and reduce their environmental footprint. But they’re also gaining popularity among unpartnered dwellers in search of temporary housing or those undergoing some sort of transition. According to Abby Shank, a Tiny Home Industry Association board member, the most common tiny home buyer is a 55-year-old single woman. 

Shank is the CEO of Tiny Estates, which runs tiny home communities in Pennsylvania and Florida. She says tiny homes are catching on with an array of people of all ages: younger college graduates who are just starting to be independent; retirees who want to downsize or be closer to family; traveling military personnel or nurses; and caregivers who live in the backyard of the person they’re taking care of. 

Nonetheless, tiny home living isn’t ideal for families. “A couple can handle a tiny home without too much challenge, but it requires the right mindset,” said Zack Giffin, co-host of the Tiny House Tales podcast. “When you add families to the picture, it becomes more challenging.”

Tiny homes advantages: Affordability and lifestyle 

Tiny homes are defined as properties under a maximum of 500 square feet. Technically speaking, that means I’ve been a “tiny home dweller” for the last few years. When I was forced to relocate from my little bungalow in West LA a few years back, I opted to rent a small 300-square-foot cabin nestled in the San Gabriel Mountains.

The price tag for purchasing a tiny home depends on its size, materials, layout, design, features and amenities, but the average cost generally ranges from $30,000 to $70,000. What you’ll pay also depends on location, whether it’s a prefab or manufactured home or built from scratch, and how much customization you require.

Because tiny homes can either be set up on foundations or on wheels, they give homeowners flexibility. A tiny house on a trailer gives you the option of experiencing new places or moving whenever you want, though you might be legally limited to parking in certain tiny home communities, RV parks or campgrounds. A tiny house secured to the ground offers more safety and a higher chance of building equity, though you’ll need to buy the lot of land, or set it up as an accessory dwelling unit (ADU) or backyard cottage. 

Another advantage of tiny home dwellings is that they can usually be set up in areas that already have police services, fire services, roads, water and sewage services. 

“With a tiny home, you get to enjoy the pride of having a house,” said Shank. “You get to customize and make your dream home.” 

Overall, you’ll be spending way less money to own a tiny home, not just on the purchase price but also on maintenance and utilities. Less upkeep means more time to pursue other things.

“Many tiny home dwellers may have originally got into it because it’s more affordable or to downsize,” said Dan Fitzpatrick, president of the Tiny Home Industry Association. “But they’re also so happy to have more time to spend skiing, surfing, spending time on their hobbies or with their families.”

Is a tiny house for you? 

Depending on where you want to live, you’ll have to review specific regulations, permits and zoning laws that allow for the building and placement of tiny homes. Tiny homes are often legally categorized into two main camps: tiny houses on foundations and tiny houses on wheels. You’ll want to be familiar with permanent structure rules, temporary structure rules and transitional structure rules.

Consider financing

If you already own a home and want a tiny home on your property as an ADU, you can take out a home equity loan or a home equity line of credit (HELOC) to pay for your new living space. With this kind of financing, you’ll be borrowing against your home equity, so you must offer your home as collateral. 

If you want to purchase a mobile tiny home that can be pulled on a trailer, you might be able to get a chattel mortgage, which is a mortgage for movable personal property like an RV. 

You’ll need to determine if you’re going with a HUD Code manufactured home or one that’s going to be on wheels. “That’s really going to determine what type of loan you’re going to be looking for,” he said. Make sure to be specific with your lender if you’ll need a chattel mortgage or a regular mortgage to pay for your tiny home. 

Look into zoning, land use and building codes

It’s easy to get excited about the features of your kitchenette and how to optimize storage in your new home, but think about zoning, building codes and permitting in the area before you move forward, said Shank. For example, tiny houses on wheels have to follow strict regulations if they’re parked for extended periods of time. Review local zoning and land use regulations to determine if a tiny house is lawful on your lot. 

Depending on the size of your tiny house and your jurisdiction, you might have to pay a hefty fee if you break the law. “There’s a local municipality in my hometown that’s a $5,000 a month fine if you have a tiny home, and they will back-fine you,” said Shank. 

Work with an experienced builder

If you decide to build your tiny house, you’ll want to work with a seasoned builder with at least four to six years of experience. Tiny home elements like stairways and shelves often have dual use, and there are other nuances when it comes to constructing facilities and cabinetry. 

“Every inch means something,” said Fitzpatrick. 

There are also practical issues that need to be handled delicately, such as humidity levels. “Make sure you have the air handling systems and proper wall coverings,” Fitzpatrick said. 

You might also want to find someone who specializes in homes where you plan to live. A veteran tiny home builder can provide guidance on special considerations and environmental concerns. 

A tiny home is perfect for my tiny budget

After halting my efforts to buy a home in pricey Southern California several years ago, I recently started my “house savings fund” again. My aim is to reach semi-retirement in my 50s and to save enough to pay for a tiny home in full by then. After all, it’ll be 20 times cheaper than the average house. 

While I still have to research zoning, building codes, rules and regulations, I’m leaning toward tiny home living. Local laws differ, but tiny dwellings are allowed in several Californian cities. Los Angeles, for example, currently allows movable tiny houses as secondary residences in backyards, provided they meet certain requirements.

I’ll always weigh the pros and cons before I make the final decision. But right now, tiny home living is looking like the best and most affordable scenario for me. 

Jackie Lam is a contributor for CNET Money. A personal finance writer for over 8 years, she covers money management, insurance, investing, banking and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives and overcome mental and emotional blocks. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming and daydreaming about stickers.
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