What It Really Costs to Live ‘Tiny’

The majority of tiny homeowners are debt-free, but that doesn’t mean minuscule living won’t cost you.

By nature all tiny homes are small, but that is often where their similarities end.

With a variety of styles, amenities, and differing levels of quality on the market, the cost of living in one of these diminutive abodes can be as diverse as the houses themselves.

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A tiny home can be a permanent structure or built for travel.

With most measuring 400 square feet or less and many on wheels, these compact digs tend to be mobile, meaning they must be able to withstand road travel in addition to the average wear and tear of a home.

Because of this, quality is a key factor when considering your purchase, says Johanna Elsner, who co-owns and co-founded North Carolina-based tiny home company Perch Nest with her husband.

Together the couple is “constantly trying to educate people on why this costs what it does to build,” says Elsner, explaining that customers often believe tiny homes are cheaper than they actually are.

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You can customize a tiny home extensively, and it can add up.

At Perch Nest, they run on average between $40,000 and $60,000.

The cost of mobility

Tiny homes allow residents great savings on utilities and keep costs down in many ways. But they do come with their own special set of fees and expenses.

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A tiny home built for the road.

Being mobile means finding places to hunker down, whether at an RV park or on a private farm. Assuming the tiny home dweller is not the owner of the land, there is likely an associated fee.

And residents will have to take out insurance if they plan to cruise the highways with their home. Cargo trailer insurance is available for those built on trailers, while those certified as RVs must have RV insurance. Paying for tax, title, and license is also a factor.

Utilities at a minimum

No matter the house, energy and water bills add up, but if a tiny house “is built well, it’s going to be more energy efficient,” Elsner remarks.

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Water, gas, and electricity are required to keep this kitchen cooking.

While going off grid (completely removing the house from public utility services) will make the abode extremely cost efficient, the economy of scale of living in such a small dwelling is practically guaranteed to save residents money from the get-go.

A small couch still costs money

In general, tiny homes require fewer furnishings, with residents paring down belongings rather than buying more.

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Clever storage solutions aren’t free.

But purchasing appropriate furniture and decorations — from clever storage devices to, say, a smaller couch — can cost money. And there are a wide range of options at varying costs, such as buying a proper mattress versus a bedroll.

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A mattress fit the bill for this loft bedroom.

Many ways to mini mortgages

Not everyone pays for their tiny house in one fell swoop. Although the goal of many owners is to live debt-free, financing options are available.

Because traditional mortgage lenders tend to require that a home has a foundation and generally have minimum loan amounts, an RV loan or an unsecured personal loan are often used.

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Living tiny may mean living debt-free or at least with less debt than the average homeowner.

In the end, there are many routes to financing a tiny home, just as there are many reasons for moving into one.

“The tiny house community is very diverse, just as diverse as any community, but it’s a group of people who want to live right,” Elsner said.

Photos courtesy of Perch Nest.

Your budget won’t be the only part of your life affected by living tiny. Check out how these tiny home dwellers have adjusted to their new digs:

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Leonardo DiCaprio Lists Second Home in a Month

He’s parting ways with homes in Malibu and Studio City.

shutterstock_383516680Now that he finally has an Oscar, Leonardo DiCaprio is narrowing the number of homes in which he can display it. The leading man has listed his home in Studio City for $2.395 million, just a week after putting his Malibu beach house on the market.

Not to worry: DiCaprio still owns multiple other homes, including in the Hollywood Hills, Palm Springs and New York City. And he’s headed to another home — the White House — next week to discuss climate change with President Obama at South by South Lawn: A White House Festival of Ideas, Art, and Action.

Although it’s no celebrity mansion, the 3,407-square-foot mid-century modern home in Studio City checks all the luxury-living boxes, from the well-appointed chef’s kitchen with vaulted ceilings and exposed beams, to the master suite with a garden tub and French doors that open onto the swimming pool.

Set on a third of an acre, it’s a rare forested hideaway in the city, with bamboo floors and walls of glass for taking in the lush landscape. The open floorplan includes expansive living and family rooms, each with a fireplace. They flow into a formal dining room right off the kitchen, which includes a breakfast nook.

A mirrored built-in bar in the family room calls to mind a more gracious era, while floor-to-ceiling windows across the entire back of the house lend a sense of nature and the great outdoors even while you’re cozy inside.

Many of the windows are actually doors that open onto a large lawn with a deck and pergola for Hollywood-style outdoor entertaining.

The listing agent is Michael Okun of Sotheby’s International Realty. Hat tip to TMZ for finding the listing.

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Warner Bros. Mansion on the Market for $40M

Marilyn Monroe crashed in the guest house, and it was O.J.’s house in a recent Emmy Award-winning series.

The dazzling Beverly Hills estate of Warner Bros. co-founder Harry Warner is on the market for $39.999 million — a lush price for a mansion that’s hosted some of the world’s greatest luminaries.

Marilyn Monroe crashed for an extended stay in the guest house, according to current owner Daphna Ziman. And since she’s lived there, Ziman has hosted parties for a who’s who of talent and sway. There was the southern barbecue for Bill Clinton before he left office, and the fundraiser with Chaka Khan that attracted Stevie Wonder, Etta James and Lionel Richie.

Most recently, the home appeared in the Emmy Award-winning series “The People v. O.J. Simpson.” It was O.J.’s house in the series, a move Ziman did not take lightly. “I was reluctant,” she said, until the producer told her about O.J.’s background and how desperately he wanted to be part of classic Hollywood. He and Nicole had been to her house, and O.J. told people it was his dream house. “It made it more real,” Ziman said of her home’s use in the series.

The 12,254-square-foot mansion was built in the 1920s, when Beverly Hills was just beginning to grow. After Warner bought it, he hired architect Paul Williams to bring out a mix of Tudor and French Country characteristics. By the time Ziman moved in, the kitchen countertops were covered in granite and a stately oak ceiling had been hidden.

She refinished the home and added her own touches, including leaded windows from Italy to lighten up the dining room. Ziman added a gym and a bar and a gallery of artwork.

Set on more than an acre, the property boasts five waterfalls and a small river running to a pond.

“I swim every morning, and I was sitting on my stair and meditating, and I opened my eyes and thought, ‘My God, I am in the middle of paradise,’” Ziman said. “It’s so private, you don’t even know you’re in Los Angeles. You’re surrounded by hundreds-of-years-old trees and the smell of gardenias and the sound of waterfalls. It’s so tranquil.”

The listing agents are Joyce Rey and Jade Mills of Coldwell Banker Previews International and Drew Fenton of Hilton Hyland.

Check out the star-studded neighborhood:

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Photos by Jim Bartsch.

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The Tricky Thing About Buying a Tiny Home

Here’s what you need to know about issues that could make buying a tiny home a big deal.

Buying a tiny house is a huge undertaking — particularly from a financing perspective.

Tiny house hunters are typically looking for homes that range from 100 to 500 square feet. Many of these home buyers are millennials, who don’t want the hassle of maintaining a large house, says Matt Parker, a real estate agent in Seattle and author of “Real Estate Smart: The New Home Buying Guide.”

“Owning a large home on a large plot of land is a relic of the American dream,” Parker says.

TV shows like FYI’s “Tiny House Nation” and HGTV’s “Tiny House Hunters” have helped the movement gain traction.

However, these programs don’t delve into the process of procuring a loan for a tiny home, says Todd Nelson, business development officer at LightStream, a lending division of SunTrust Bank that offers loans for tiny-home buyers.

“Many tiny homes are uniquely built and don’t conform to the mortgage requirements for a traditional house,” says Nelson.

If you’re looking to buy or build a tiny home but don’t have enough cash on hand to foot the whole bill, here’s what you need to do to successfully finance your purchase.

Opt for a home on wheels

Tiny homes are frequently purchased using recreational vehicle (RV) loans, which are unsecured, fixed-rate mortgages that typically have two- to seven-year payoff plans. Generally, these loans have no application fees or closing costs.

“It’s a straight installment loan,” explains Nelson, who says that borrowers usually need a FICO score of at least 670 to qualify.

However, RV loans typically have higher interest rates than traditional home loans (LightStream’s loans start at 2.99 percent but go up to 9.94 percent), are often capped at a $100,000 maximum, and — unlike traditional mortgages — are not tax deductible.

Find a mortgage lender that specializes in tiny home loans

Although the tiny home movement is gaining speed, it’s still a relatively niche market.

“You don’t see a ton of appetite among traditional mortgage lenders” to offer loans for tiny homes, says Nelson, since many mortgage lenders have minimum loan amounts that are above $100,000 and only offer mortgages for homes on permanent foundations.

Thus, you want to work with a lender that focuses on tiny home loans.

Be mindful of zoning laws

When you’re buying land, you need to first make sure there are no restrictions on what type of structures you are allowed to build, advises Ryan Mitchell, owner of a 150-square-foot home and founder of The Tiny Life, an online resource for tiny home buyers.

This involves looking at local, county, and state zoning laws. Some zoning regulations give minimums for lot size and square footage of houses, as well as restrictions on how many residences can occupy a lot or given area.

The American Tiny House Association offers a comprehensive list of state-by-state regulations.

“If a parcel of land doesn’t meet all of the zoning requirements, we can’t approve the loan,” says Nelson. Knowing where you can — and can’t — build your tiny home is crucial.

Factor in all of the costs

Costs can vary significantly for tiny homes, so before you apply for a RV loan, you should analyze your budget. Tiny House Community provides a useful spreadsheet you can use to calculate the various expenses you’ll incur.

Some good news: if you’re using an RV loan to build a tiny home, you have a lot of financial freedom in terms of how you choose to spend the money.

In addition to using the cash to buy a parcel of land and pay for construction costs (including building materials and labor), you can put the money toward home furniture, landscaping, and solar paneling.

Moreover, as with any home purchase, you need to consider ongoing maintenance costs once you’re living in the home. (Yes, even homes with smaller footprints require routine upkeep.)

One cost to budget for: Many tiny houses have stained siding that requires re-staining every two to three years.

Consider your time horizon

Determining your best financing option will depend on your life plans. If you’re willing to stay in your current home for a few more years, it might make sense to wait until you’ve built enough savings to buy a tiny home with all cash.

In fact, 68 percent of tiny homeowners have no mortgage, compared to 29 percent of all U.S. homeowners, according to research compiled by The Tiny Life.

Want expert advice? Meet with a fee-only financial planner to assess your finances and your goals. You can find one through the National Association of Personal Financial Advisors.

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5 Things You Need to Know About Real Estate Disclosures

Whether you’re a buyer or a seller, disclosures are a key part of your real estate transaction.

It’s standard practice in real estate to give a home a fresh coat of paint before putting it on the market. Nine out of 10 times, the intention is to show the property at its best. But every so often, the seller paints the house in hopes of covering something up.

In most parts of the country, sellers (and agents) are required to document any known defects —  whether current or past — to potential buyers. But some sellers don’t play by the rules and will try to get one past a buyer.

Whether you’re a listing a home for sale or in the market to purchase, here are five things you should know about real estate disclosures.

What is a disclosure?

Disclosure statements, which can come in a variety of forms, are the buyer’s opportunity to learn as much as they can about the property and the seller’s experience in it.

Potential seller disclosures range from knowledge of leaky windows to work done without the benefit of a permit, to information about a major construction or development project nearby.

Not only do disclosure documents serve to inform buyers, but they can also protect the sellers from future legal action. It is the seller’s chance to reveal anything that can negatively affect the value, usefulness or enjoyment of the property.

How does a seller make a disclosure?

Disclosure laws vary from state to state, even down to the city and county level. California has some of the most stringent disclosure requirements. The law requires that sellers (and their agents) complete or sign off on dozens of documents, such as a Natural Hazards Disclosure Statement, Local and State Transfer Disclosure Statements, Advisories about Market Conditions and even Megan’s Law Disclosures.

Disclosure typically comes in the form of boilerplate documents (put together by the local or state real estate association), where the seller answers a series of yes/no questions about their home and their experience there.

Additionally, sellers must present any documented communication (between neighbors, previous owners, the seller or the agents) about a substantial defect or item that could have an adverse impact on value.

Depending on where you live, sellers can be on the hook for what they disclose (or fail to) for up to 10 years. Sellers should err on the side of caution. If you know it, put it out there. If you try to hide something, it can come back to haunt you in the form of an expensive lawsuit.

What do sellers disclose to potential buyers?

Previous improvements, renovations or upgrades done by sellers are typical disclosures, as well as whether work was done with or without permits.

Buyers should cross check the seller’s disclosures with the city building permit and zoning reports. Work completed without a permit, or approval by the municipality, may not have been performed to code, which could result in a fire or health hazard.

Other standard disclosures include the existence of pets, termite problems, neighborhood nuisances, any history of property line disputes, and defects or malfunctions with major systems or appliances. Disclosure documents often ask sellers if they are involved in bankruptcy proceedings, if there any liens on the property, and so on.

Is a disclosure the same as an inspection?

Disclosure is something given to the buyer by the seller documenting their knowledge of the property. It is not the same thing as an independent inspection by a third party. An examination may reveal defects that the seller may not have been aware of.

The buyer should always do a full property inspection, before moving forward with the purchase. The inspector checks all systems and components from the roof to the basement. Often, in the interest of the ultimate in full disclosure, a seller hires a property inspector before going on the market and supplies the written report to the buyer.

When does the buyer receive disclosure statements?

In most markets, disclosure documents are provided to buyers once the seller has accepted their offer. In addition to their inspections or loan contingency, the buyer has an opportunity to review the seller’s disclosures. If the buyer discovers something negative about the property through disclosure, she can usually back out.

In some markets, sellers provide these disclosures to the customers before an offer. Smart sellers let buyers know everything they need to know up front. It’s smart because it saves everyone time, hassle and expense by preventing deals from falling apart once they’re in escrow.

Buyers must sign off on all disclosures and reports. So it’s important to review them carefully and ask questions if you need to. Full disclosure upfront is the way to go. Providing full disclosure can help a seller. By laying their cards out, sellers can give buyers a sense of comfort or peace of mind, making their home more desirable than a competing one.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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