The small-home revolution is upon us. With rising housing prices, stagnant incomes, and increased demand for homes, people are starting to get creative about their living space requirements. Couple this with the minimalist movement, and we have ourselves a legitimate real estate investing opportunity.
With the average home price in the U.S. sitting at $248,857 according to Zillow, it's no wonder many are considering more affordable options for living. Here's an overview of how to build a house for under $50,000, the pros and cons of small homes, and whether real estate investors should try to get in on the action.
Benefits of small homes
Aside from the obvious cost savings, there are several benefits to building a small home that are worth considering.
- Smaller carbon footprint: For environmentally-conscious real estate investors, a small home is easier on the environment given its smaller envelope size. Fewer lights, less space to heat, and smaller appliances are just some of the energy savings of small homes.
- Cheaper to live in: You may even be able to carry the house without a mortgage if the cost to acquire or build is low enough.
- More units, smaller space: Depending on zoning, you can fit more liveable units on a piece of land than with conventional single-family home design. This increases affordability and supply, both of which are growing concerns.
- Operating costs are lower: Fewer spaces means less maintenance and cleaning.
- Exit strategy: Because small homes are much more affordable and demand is increasing, you have a ready market to sell your small home should you want to exit.
- Location flexibility: Because most small homes are moveable or modular, you can more easily relocate.
- Easier and cheaper to furnish: Whether you are renting out your small home or living in it yourself, less space means less stuff and furniture needed. Although custom smaller furniture may be more expensive, you need to remember you are buying less of it.
Ways to save money when building a house
The big-ticket items associated with single-family home building are significantly reduced or eliminated when building a small home.
Excavating: You won't be digging underground for a basement, so building a small house saves you these excavating costs. Further, because many small homes are mobile, you may not even need a foundation for your tiny house.
Square footage: Small homes can range in size from 150 square feet all the way up to 500 and even 1,000 square feet in some cases. Although your cost per square foot is likely higher than a larger construction, the fact that there is less space means your overall costs will be significantly less.
Modular and prefab homes: Many small homes are either fully pre-assembled in a factory or are built to be assembled once they reach their desired location. These kit homes save significantly on construction costs, because you have almost none.
Land: You either need much less land for a small home or are leasing the land, given many small homes are moveable or modular. Smaller lots are less expensive, and land leases also can be a way to save on land acquisition.
Contractors: Because small homes can be pre-assembled or fully built prior to arriving at your land, you save a significant amount of money on builders and contractors. You can likely do most of the work yourself, or save the final touches for critical tradespeople such as electrical work.
Spending under $50K to build a new house
Here's a breakdown of what you may need to buy for your small home, keeping in mind you want to spend less than $50,000. Although some of these requirements will vary depending on the specific tiny home you build, you can expect to spend these averages according to industry experts:
- Trailer: $4,000
- Lumber: $4,000
- Roofing: $1,000
- Windows: $3,000
- Siding: $2,000
- Electrical: $1,000
- Fixtures: $2,000
- Appliances: $2,000
- Kitchen and storage: $3,000
- Bathroom: $3,000
- Flooring: $1,000
- Paint: $200
- Furniture: $2,000
- Additional costs: $10,000
Total cost to build: $38,200. Obviously this budget contains very rough estimates and depends extensively on your location, cost of materials, the finishes you choose, and the size of your small home. Land acquisition cost is also not included.
Other ways to cut costs when building a home
You can convert an existing cabin, shed, barn, or home into your new small home. You would save some of your costs if you have a structure already built, even if it's a fixer-upper. If you can do it yourself (DIY), you can also save on a builder and general contractor, keeping labor costs to a minimum.
Maximize outdoor space with decks, terraces, and greenhouses. You may only have 200 square feet of closed-off space, but you should embrace the outdoors with larger living areas outside of your core living area. A small terrace house with a large vegetable garden area is a great way to utilize outdoor space as well as put food on your table.
During your build, you can use recycled or used material. Use craigslist, your local Habitat For Humanity, or thrift store to add, where appropriate, second-hand and recycled items. You can also look at junkyards, flea markets, or friends and neighbors who may have extra material to supply for the construction of your home.
Aside from building the small home yourself, you can also explore renting the tools you need instead of buying them. During construction, choose your materials carefully, as there may be less expensive options. For example, using asphalt shingles instead of metal roofing, using vinyl instead of tile, and cutting out unnecessary appliances such as a washer and dryer or dishwasher.
You should also buy energy-efficient everything to help increase the longevity of your home as well as reduce pressure on your electricity consumption.
The bottom line
Affordability, mobility, and being environmentally-conscious are just a few reasons why many people are moving to living in smaller homes. Thinking about taking the leap? Book a stay in a small home for a few nights to see how you like the space, lifestyle, and design. Check out Airbnb, Vrbo, or Booking.com to see what's available in your area.
If you want to build a house for under $50,000, you have a wealth of designs and layouts available to you. Consider not only the type of small home but also the cost-savings associated with how you build it and what finishes and furnishings you include.