As some of you may know, our big covid purchase (i.e. something big and impulsive you bought during the pandemic) was a tiny house lot. We fell in love with the idea (and actual tiny house neighborhood) of having a tiny house. Tiny houses are pretty awesome and having your own place out in nature seemed very appealing. So, when we learned that there was a lot for sale in the neighborhood that we’d stayed in – we leapt at the opportunity! This was back in early 2022; before real estate slowed down and back when supply chain issues meant you really couldn’t realistically build given the months back log.

In 2023 the supply chain seemed to lighten up and it ended up being one of my big goals to ‘build a tiny house in 2023’. I thought it would be a cool update to share how things are going!

Where we stand

I started 2023 doing lots of research; into the type of houses we could build, the approximate cost for building them, and also importantly, the rental returns. Mrs. Money and I wanted to have this be a profit generating real estate opportunity for us. Things were looking decently well; of course it’s tough to know exactly how things will turn out but you do your research and make a decision based on that.

We ended up working with our realtor to pick out our desired unit and got the final numbers all figured out. Oof. We knew it would be pricy and I figured it would be about 10% more than we had expected but all-all in – i.e. the deck, the outdoor fire feature, the little add-ons that you realize you do need but are bummed that they don’t come standard, oof it ended up probably being 15-20% more than we were initially expecting. A lot of that it probably on me…I probably should have gotten more solid quotes earlier on, or probably should have known to ask more about what was standard vs. what wasn’t.

No sweat I said to myself; as long as the rental income is still there right? I did a bit of a broader search instead of just looking at the 2 houses I’d been looking at and oof – the calendars were not nearly as full as I had hoped. Perhaps I had picked a bad example of a house to look at? Perhaps is the fall (when I started looking) much busier than spring / summer? Perhaps 2021 and 2022 was an anomaly of a year in terms of vacation rentals with people pulling back in 2023?

The final straw that broke that camel’s back and made us really hit pause (for the time being) was interest rates. I suppose 2018-2022 interest rates really spoiled us being in the 2-4% range but I almost fell out of my chair when I heard 8% for a construction loan. Once I got out of my chair I realized that construction loans are really only for the time that you are building, you only pay interest on them, and then you can roll them into a 30 year loan, but even those rates were 6-7%.

How I feel about it all

It was after all this that we decided to hit pause! Were we uninformed, did we have bad data or did we just have happy ears? I think it was a combo of being new to this type of real estate market, a bit of happy ears (or the covid fog) and perhaps a bit of the world just really changing in 2023. In 2021 and 2022 people desperately wanted to take vacations but may or may not have felt comfortable going far away and instead stuck to closer destinations, and being outdoors in something like a tiny house was very appealing. Supply of houses was also limited with the supply chain issue – rentals were in high demand driving up prices! So, all in all I think we learned a lot – and I had a buddy in college tell me one time that education isn’t free so we learned a lesson by getting some skin in the game!

One of the great waterfall hikes nearby

Where we stand now

For right now we’re sitting tight. We had actually thought about trying to sell the lot – apparently at least on paper we’ve made a 50% return in just over a year. But lot sales in the neighborhood have slowed down with a few sitting for months on the market. So we may still try to sell the lot but we’re kind of sitting put for now. Interest rates being high are less than ideal and really screw with our rental calculations so our alternative plan was to buy a rental house back here in the city, similar to our first rental house. However a 30-year loan at 7-8% has put that on pause too!

We paid cash for the lot so thankfully we do not have to make a mortgage payment each month and we are not in a hurry to do something. I do like for my money to work hard for me and unfortunately an empty lot isn’t making me money but for now it’s not losing me money and in this market that’s kind of nice!

Just being indecisive

It’s funny, I don’t really think of myself as an indecisive person, in fact I pride myself as our family motto goes of, “knowing what we want and knowing how to get it”. As much as I hate to say it though, this market does have me a bit on edge. I’ve still got friends laid off unable to find jobs, house prices are crazy high, the government might default on it’s debt, and interest rates make renting less attractive. So yes we took a risk buying a lot, but I believe (at least now) that we took a smart risk. We haven’t lost risk and just because we haven’t starting building now doesn’t mean we won’t, or maybe we’ll sell it and buy a year-round rental house instead.

For the time being we don’t have to make a decision and we don’t feel like we have strong information in one way or another, so we’re sitting put for a bit! We’ll be ready to make a move if and when something changes but for the time being I think we’re good with that empty lot in a tiny house neighborhood!