Why Spending Almost $100,000 on a Tiny House was the Best Financial Decision of my Life

This is an article I first wrote several years ago for The Tiny House Magazine, which if you are not aware of, you might enjoy checking out! https://tinyhousemagazine.co/   Anyway, I thought it was time to share here with those of you who didn't see it when it was first published.

$99,702.00 is a lot of money. At least for me it was. More than I had ever had in one place at one time for sure! But that is what my tiny house cost. And looking back now after having lived here in my house for 7 years, it was a great decision for me. This is true for many aspects of my life, but the one I want to address today is the financial side of that. I have seen and heard a lot of discussion about "what a tiny house should cost." Or that the "whole point of a tiny house is to be cheap." Or "tiny houses on wheels are a dumb investment because they don't appreciate like a house attached to the land does."

 Just for a quick breakdown of where that number comes from, I helped design the house I wanted and then had it built for me by a professional crew. So that total number came from these things. The downpayment and loan together being the cost paid to the builder for materials and labor. The sales tax went to my local DMV because as far as they are concerned my house is an RV and that is the tax due for a vehicle purchase. The delivery charge covered getting the house from the builders in Colorado to where I live in Wyoming. The solar system cost was for all the components of my little power system which I put together with the help of a friend who has much more electrical knowledge than I do. That's the way I have produced the power I have used here since day one. And then the wood stove cost was for the wood stove, chimney pipe, and associated costs to install the wood stove I added after my first winter living here so I figure that's part of the real cost of the house being set up to work for me. And then interest that was paid to the bank on that loan before I paid it off. This is a cost I think many forget to actually calculate in the process of buying a home of any size. 

$74,010.00     loan

$  5,500.00     downpayment

$  5,500.00     sales tax

$  1,000.00     delivery

$  3,500.00     solar setup

$  1,100.00     wood stove

$  9,092.00     interest on the loan

$99,702.00   Total

 So, back to that is a lot of money!  Here is why it has worked so well for me personally. And if your situation is similar to mine it may make sense for you as well. Obviously, like most things in life, if your situation is totally different, this may make no sense at all for you.

And here is a video discussion of this whole topic that I recorded more recently if you like video better.

 The basic reason, and there are many different ones for different folks, I moved into a tiny house in the first place was to be able to stay in the area where I had lived for years. That was what I was looking for when I settled on a tiny house. Since then I have experienced many other benefits that I have written and talked about both in this magazine and else ware. But what I was focused on when I first decided to go tiny was solely to be able to continue living in the area I was currently in.

 Before living tiny, I had shared a rental for many years with a room mate who is still a very good friend of mine. But one year, a bit before our lease was up for renewal yet again, the place we were sharing was sold by the owners and so I realized I was about to be homeless. My basic goal was to be able to continue living in the same general area where I already had a job, friends, and loved the mountains. While housing was expensive when I moved to the area, when I left my parents house 14 years ago, it's only become more expensive over those years. And as I searched for available rentals, I quickly realized that the tiny handful of potential options that existed, all cost close to or more than 100% of my income. So I had a few choices. I could leave the area. I could try to figure out how to earn a lot more money. I could buy a house. Or I could do something unconventional. Knowing I wanted to stay, and having no interest in pursuing a higher paid career of some kind, and with traditional homes attached to the ground in my area selling for an average price of 1.3 million, I started to look at the more unconventional options for living.

 Full time van life was starting to look like the best way to go so I was reading a lot about various van conversions and setups when one day I stumbled onto an article about a teen who avoided a mortgage by building himself a tiny house in his parents backyard, and then getting a debt free start on his housing life. To the best of my memory, that was my first encounter with what we now call Tiny Houses. As I absorbed the photos of his little setup, this seemed like the way to go! I live in a very cold and snowy area and this was a small, comfortable looking, warm, cozy, well insulated setup. But still on wheels giving it mobility options more like a van. Which tend to be a lot harder to keep very warm in the extreme cold. So a new idea was born and I pursued learning everything I could about tiny houses. Since this was nearly 8 years ago now, there was not much out there at the time. 

 Rapidly I decided that building a tiny house by myself was not going to work well for my situation. I assume I could have learned how to build a house but it was not a skill set I currently had. I didn't own any of the tools required, and did not have a place to do the building. Also, I was about to be homeless at the beginning of winter, so time was of the essence. "Fast, good, or cheap – you can pick any two" is a quote that I found applied well here. Fast I needed. So that left me with good or cheap to choose between. I could see myself living in a tiny house for a long time, as I knew already I could be comfortable in some pretty small spaces. Having lived out of my car for multiple weeks on road trips, time spent backpacking and living from a small backpack and in a tent that is only a few square feet total, again for weeks on end. So I wanted something high quality that would last for years. I have always valued well built and designed things that provide a use over multiple lifetimes rather than inexpensive disposable junk. From experiences with backpacking gear, I was well aware that smaller high quality things, like appliances, can cost a lot more than their larger counterparts. So I chose fast and good. Which was not cheap. At the time, there were only two companies I could find that were doing actual building themselves rather that just plans and design work for you to build you own. Oh how that has changed over the years! One was in Tennessee and the other in Colorado. Since Colorado is about a thousand miles closer to me, I went with them. 

 One note I want to make here in relation to pricing, is that everything I discuss here is for my finished home as I have lived in it for years now. If you have ever seen some of the "this guy built a tiny house for $500 or $3000 or whatever!" articles or videos and are wondering about the huge difference in prices, here is what I have noticed. They are usually something built on the ground, with mostly re-used materials, and talking about just a shell. All of those things are totally fine. But here is what they do not include. A heavy duty trailer that can handle safely carrying the weight and mass of a house down a highway. High quality insulation. The most durable roofing available. High quality appliances. Well insulated and sealed windows. Lifetime cedar siding. Being fully finished with things like natural wood, cork, and stainless steel. Including things like heating or electrical power systems. All of those are expensive, but also make my home something that will be solid and livable for longer than I will be alive. In the years I have lived here, the only maintenance I have had was needing to replace the little water pump a couple times. Everything else has been and continues to be in wonderful condition.  

 But when you are buying a house built for you, you need to be able to pay for it up front. I did not have that much money sitting around. Not even close. Having no debt of any kind was a great start and a position I am very thankful that I always chose to maintain. I had actually lived for years consciously choosing to pay all my bills and then simply giving any remaining money away to those who had bigger needs than myself. So while I had no debts or outstanding bills, I also had no substantial savings. But the builders were going to need about $80,000. The day I decided to go this route I started saving every penny I could, picking up extra hours at work any time they were available, and selling off the handful of large items, like couches and beds, that I owned that I knew would never fit in a tiny house anyway.

 I considered continuing to rent while saving money to buy the house for cash which has always been my preferred way to purchase things I need. But of course the problem of every rental now available being at or over 100% of my total income made that impossible. So I considered taking out a loan. In general I do not like debt at all. After all, "the borrower is slave to the lender" is still just as true today as when it was written some 2600 years ago. But I do understand there are a few circumstances where it can be a useful tool if used carefully. A useful tool like fire or chainsaws, but potentially much more dangerous than either of those.

 When I did the math on what I was currently spending on rent every month compared to the total cost of the tiny house, I realized I would spend that same total over the next eight years if I continued renting at the rates I had been paying for the previous seven years. And then have nothing to show for it other than having had a place to live for those years. So I figured if I had managed to pay that much total for rent in the years I had been renting so far, I should be able to continue pay that same amount over the ensuing years. And at the end of that I would actually have a tiny house left! Not to mention how much rental prices climbed in the years in between. If I tried to rent an apartment in this area today and do the math based on that higher rental price, I would have spent the same total as the cost of my tiny house in about four and a half years of renting. And this math doesn't even take into account that my solar system setup has meant that I haven't paid a utility bill for all these years which was something I used to pay every month in addition to rent.

 This made the cost of getting a loan worth it for me. Thankfully the builder I had already decided to go with had just become RVIA certified a few weeks before. Which had absolutely no value to me at all, other than in being able to obtain an RV loan. First I talked to my local bank where I'd been banking for years. They said just a flat "No." They were not interested in anything of the kind. But I had heard that Credit Unions would sometimes work with loans that traditional banks would not. So I sat down with the loan officer at the local Credit Union. I explained exactly what I was wanting to do and she listened. She was willing to work with me and to this day I am thankful for her decision. Jan, if you ever read this, thank you! Remember this was still the time when if you said "tiny house," people said "Huh?" Not "Oh! Like the cute ones I saw on that TV show!" which is the reaction I get most often these days. Needless to say, that Credit Union has gotten all my banking business from that day forward. 

 But this brought me to the next challenge. I didn't have a credit history. Not bad credit mind you, just none at all. Because as backwards as it seems to me, having lived for years, paying all your own bills without ever getting into debt, is not considered financially responsible by credit scorers. They prefer to see lots of debts with regular payments on them. Simply having worked, saved, and paid cash for everything one needs is not valued by them. I had never had a loan of any kind, but by my age they expected I would have student loans, auto loans, credit cards, and more. While Jan was willing to work with me, she needed something to put on paper as proof to whoever oversees such things that she did not make a totally stupid loan to me. The tiny house, or RV as their records would call it, would be some collateral, but their math says that things like RV's only depreciate over time so that was not enough. Here is another place I am thankful for those who have been willing to work with me. One of my sisters has made some very different choices in life than my own. Which involved lots of that paperwork records of school loans, auto loans, credit cards, mortgages, etc. She and her husband were willing to co-sign a loan so that record could go on the paper work. Even with that, Jan looked at me across her desk, sighed, and asked, "are you really going to pay this back?" I said that I would. And while that assurance is no kind of a thing to put on a paperwork form for a supervisor, I guess she believed me, because she signed off on the loan. 

 Over the weeks of working all this out I had been working lots of extra hours and saving every penny I could as I needed all of them to cover the down payment, sales tax, and delivery charge for the house. And I mean all of it was needed. I skipped meals, ate beans and rice and grocery store discards, purchased partial gallons of gas with just the loose change I had so I would be able to get to work that day, and so on. Pretty much if I wasn't going to die or loose my job without it, I didn't spend money on it. The loan was set up with a 15 year term at 4.75% interest which made the required monthly payments $575.67. This was less per month by a good bit than I had been paying in rent. I knew from the start there was no way I wanted that hanging over my head for the next fifteen years of life, so from day one I treated paying that down as an emergency. After all I didn't want to spend that many years of my life as a slave. Plus every extra bit I could pay down off the principle would save a lot of interest over the life of the loan. Because of course when you get a loan or mortgage, most of the first payments are going to just covering the interest, not actually paying the loan off hardly at all. So I dumped every single cent I could spare after covering my basic needs like food and gas to get to work and back, into paying down that principle. While continuing to pick up as much extra work as I could doing things like cleaning rental houses at midnight between guests after working a double shift at the restaurant. I mean every penny I could spare. The Credit Union had a really nice setup with no penalties for early payment which was key for me! And where I could really easily do an electronic transfer to paying down the loan at any time. So if I had an extra $10, $3, $100, or whatever, I sent it strait to the principle. Each month ended up with many of those little payments in between each required monthly payment. And they started to add up. That principle balance came down which also meant that a larger share of each regular monthly payment was going to the principle rather than just interest. So it all worked together and just got better every month.

 After a year, I had paid off enough of the total, that the bank was willing to re-write the loan removing my sister's name as a co-signer as the balance was smaller, and they now trusted I was actually going to pay this thing off. And I kept up that plan of chipping away at every bit that I could, every time I had a little bit of money not needed else ware. These were the months of working 100+ hours a week at multiple jobs when no one saw many blogs or videos about my life. There was just no time to do any of that stuff! But it worked. That total got smaller and smaller. Three years in I had really made a dent in the total. At this point, circumstances at my job changed which slowed down the progress on paying it off a little due to reduced income. Just at the 5 year mark, I made the last payment to the bank and was once again debt free. Which was a wonderful feeling!

 And paying the whole thing off in 5 years instead of 15 saved me about $20,000 in interest that I would have otherwise had to pay on that loan. So for me, that was huge! It still cost me an extra $9,092.00 in interest to be able to borrow and use money I didn't have at the time, but that was a lot less expensive than if it had cost me $29,611.21 to borrow the same money! I am thankful someone was willing to let me use money that I did not have in hand at the time, and that seems like a very fair price to pay for that privilege. Though I am so thankful to be back to debt free in life and hope to always stay that way in the future! 

 So that is kind of all the background on how it all worked, but here are the reasons I have found it to be a very good financial decision for my life.

 First, as I described, I would have spent the same total dollars in about four and a half years had I continued to rent instead. So after that period, if I just burned my house to the ground, I still would have come out one massive bonfire ahead of having rented for that same period. Since I didn't burn my house down however, I'm headed to year 8 of life here. So every day I continue to live in my house, it becomes a better and better deal. I do trade labor to my landlords, helping to care for their property, for my house parking spot, as I have all these years. So that's been working out well for both of us but does not cost me cash rent.

 Second, while a tiny house on wheels may not appreciate like a house attached to land, which is a common criticism I hear, I do still have a home. Whereas if I had just been renting, I would not have that at all. I still live in it and enjoy life here. If I wanted to do something else, I could sell my home to someone else for some price higher than zero. Which again is something I could not do had I kept renting. It is of continued value to me and could be to others as well. I can live in it the rest of my life as it is a very well built home with high quality materials built to a higher standard than most custom residential home construction, and it is going to continue to be sound home for years after I die of old age. I can move it to my own land. I can sell it to someone else at any point in there who could then continue to live in a comfortable and high quality home for many years. I could rent my home to someone else either long term or as a vacation rental if I choose not to continue living in it. Once again providing me with a valuable income I would have never gained had I spent that total purchase price on renting an apartment for those years. I could keep it as a guest house for family and friends if I move into another home. I could host people who want to learn about off grid life and teach some kind of classes. And so on. You get the idea. It's still a valuable home that can do all kinds of things, for myself or others, for decades into the future. All of which would not be options for me had I spent that total on renting an apartment instead of buying a tiny home. Which brings me to the somewhat obvious point that if you live in an area where you could rent a nice home for $200 a month rather than the prices in my area, spending the same amount I did on a tiny home would require a whole lot more years of living in to make the investment pay off for you. Or if you can buy a farmhouse on an acreage for $50,000 in your area, rather than an apartment for $1.3 million, once again, this decision may not make sense financially for you in that area. 

Thirdly for me, staying out of debt in life is now actually being aided by owning my tiny home. I am no longer putting any of that money towards my housing through loan payments or rent since I own my home free and clear. So now I can save all of that money for other purchases like buying my own land debt free to be able to move my house to it. Use it for expenses that come up in life. Choose to work less hours for money and have more time to spend on the things I can provide for myself by doing stuff like growing and preserving my own food, foraging, mending clothing, and splitting my own firewood. Rather than having to pay someone else to provide all those things or services for me. With some time left over to just be able to pursue things I love like photography, time with friends, reading, backpacking, and teaching skills to others. All of these things are a huge value to me and made possible by the time and money I invested into purchasing my tiny home. 

 So that's why spending nearly $100,000 on a tiny house has been the best financial decision of my life.