David Morey 
Real estate is a powerful way to increase your net worth and build a passive income stream, but it can also be challenging to find the right investments in a crowded market. As such, hopeful investors need to find options that will satisfy their income needs without putting them in the red. Many real estate investors immediately default to purchasing the typical home and renting it out long term, but this may not actually provide the best return on investment. Instead, you can think smaller, both in terms of square feet and contract terms. Let’s examine the benefits of tiny homes for rentals, including their target audience, resale value, and estimated costs.
These Properties Are Cheaper Full Size Homes
Firstly, your upfront investment is a crucial consideration when choosing a rental property. Depending on your marketplace, a traditional property can range anywhere from $100,000 to $500,000 or more, even for a basic home that will need considerable rehab.
Worst still, market rent may not match the estimated value of the property. Some areas have rent controls, which artificially deflate the market rent and mean you must take a lot longer to recoup your upfront costs. Sometimes, the rent you can charge may not even cover your mortgage and utilities, leaving you in the red.
These are not problems with tiny home rentals. Firstly, they are much cheaper, even for new construction. The average tiny home costs between $30,000 and $60,000, depending on your marketplace, but it’s possible to purchase one for even less. This is significantly less than a one-bedroom property in most areas.
You Can Enjoy Higher Profits from Short-Term Rentals
Next, short-term rentals typically provide a better profit margin than long-term rentals, which is part of the reason why so many cities are attempting to restrict their use. Investors have realized they can get significantly more per night from a short-term rental, even when considering higher vacancy rates.
For example, you may be in a market with an average long-term rent of $2,000 but a nightly rate of $200 for vacation rentals. Even if your property is only occupied for 11 nights that month, you still make more than by renting it for the entire month.
You also have fewer concerns about expensive repairs from long-term tenants who may not take care of your property. A frustrated vacationer is less likely to take their anger out on the home; they’ll leave a bad review instead.
While that can still eat into your budget by deterring other guests, it is not going to require extensive rehab like a vengeful tenant would.
Tiny Home Rentals Appeal to Multiple Demographics
With the explosion of Airbnb, more people are enjoying the convenience and privacy of a full-home rental, but they also want to keep things simple. Some vacationers are dipping their toes into the minimalist lifestyle and want a “trial run” of what it would be like to own their own tiny home. Still others are traveling for work or just want some time to themselves, making their needs simpler.
There Are Many Options for Tiny Homes
Years ago, people typically had to build their own tiny homes, and they faced challenges like zoning restrictions or confusing building codes. However, the modern investor has plentiful options, including turnkey products like park model homes. These beautiful log cabins are built on wheels, delivered to your property, and then hooked up to utilities. They can be ready for tenants within days of delivery, so you can enjoy a great turnaround.
Park model homes are also designed to last up to 50 years with proper maintenance and have a high resale value. Better yet, they are classified as recreational vehicles due to their wheel frames, so you will pay lower taxes than you would with a traditional home.
While park model homes are one of the best options on the market, you also have other choices.
For example, you can buy a tiny home kit off Amazon and work with a contractor, or you may build a container home for great eco-friendly marketing. Some are even marketing more premodern homes, like yurts and straw homes, to those interested in unique experiences.
The Magic Lies in Your Marketing
You can net a tidy profit from a tiny home with minimal investment, but it does require clever marketing. In your listings, you will want to state the advantages of a tiny home for a vacation and stress the typical occupancy so people are not surprised when they arrive. Mention the local amenities, such as beautiful scenery or close access to local attractions at an affordable price.
You should also sprinkle some keywords into your listings that talk about minimalism. For example, if you purchase a park model home, you could connect your listing to the popular Scandi aesthetic and suggest that your rental is perfect for those looking to “test drive” this lifestyle.
Real estate investors can find cost-effective yet sustainable options to grow their rental income through tiny homes. Research local zoning restrictions around these options and build your marketing plan to ensure that you have plentiful passive income for years to come.
