Everyone had their COVID era purchase, a larger(ish) purchase that maybe was a little out of character or perhaps spur of the moment. It’s not to say we regret that COVID era purchase, it’s just something we can look back and laugh on. 

For Mrs. Money and I, our COVID era purchase was a 0.75 acre lot in the mountains of Tennessee in a tiny house community. To take you back to a different time, the COVID era lockdowns did many things, but two that were particularly poignant for us (and I think many others too) was that a) we loved being outside more often and b) there was something appealing about a minimalist lifestyle. Being outdoors seemed safe, it was a chance for us to gather with others and do life, something that we couldn’t or didn’t feel safe doing indoors. Also the COVID era gave you plenty of time to reflect on what was important in life and many of us realized a lot of what we have isn’t important and we Marie Kondoed so much of our stuff out to places like Goodwill to the point that Goodwill said ‘no more stuff!’. 

A tiny house scratched both those itches and there was something so magical about a tiny cabin in the mountains surrounded by nature. When our neighbors told us about this place where they owned a lot. We went up for a stay and instantly fell in love with the neighborhood and had a fantastic weekend stay. When we learned there was a lot up for sale (previously all had been sold out) we jumped at the offer and bought it site unseen! 

2023 was the year! Psych! 

In 2023 we set a goal to commence building a tiny house. The management company had a great construction program and it was decently turnkey. 2022 construction was super backed up and there was no way we could build. 2023 though the backlog cleared and we were good to start! We picked out our model, customized it and got our quotes. 

Oof, the order total came in much higher than we were expecting. Inflation at it’s best! Well no worries I said, as long as we have the rental income to support this. Trusting what the rental estimates provided by the company said but wanting to verify them, I went on AirBnb and did some research. Gasp! Most of the units only had like 1-2 weekends per month rented…around 6 nights per month. That would DEFINITELY not cover the mortgage. Our first rule of real estate is not to lose money and we would be breaking it. Then the icing on the cake was when I called a mortgage broker who quoted me an 8% interest rate. After I fell out of my chair I did some research and learned that construction loans can be refinanced into a conventional loan at a lower interest rate. Ok phew! But then I re-fell out of my chair (it was a dramatic day!) when I was told conventional interest rates were 7%. 

I guess my head was stuck in 2020 numbers pre-inflation and back when mortgages were like 3%. We then pumped the brakes and sat out in 2023 waiting until 2024 to decide something.

2024 Research Time

With some time on my hands over the holidays, I did a little bit more research, this time on Zillow. I love Zillow, but find that it’s not always the best at giving you the data you’re looking for so I opened up a quick spreadsheet and got to work.

There are 2 ways to make money in real estate – 1) You make more than the mortgage and expenses from your rent and 2) You make money with the house going up in value. We had already figured that we wouldn’t be cash flow positive seeing that the average rental nights was like 6 nights/month. I then wondered well hey could we make money with an increase in value?

Our tiny house neighborhood is pretty new with maybe only 40% of the lots having houses on them. But next door there is a neighborhood that is completely built and the houses are very similar so I figured that would be a good comparison. Here’s what I found:

• In 2019 the average house sold for $150k.
• In 2020 that dropped to $138k. Makes sense – 2020 was nuts and everyone freaked out a bit.
• In 2021 it jumped $243k.
• In 2022 it skyrocketed to $361k.
• Then in 2023 no houses were sold, despite plenty being on the market. (Grimace face emoji). 

Yikes. 2023 there were no houses sold and not for a lack of trying. I tracked several listings consistently drop their price but still nothing. 

2024 What to do

For a while there in our neighborhood lots were selling for a pretty nice amount higher than we paid. Mrs. Money and I said well hey maybe we sell our lot and take the cash profits. That was mid 2023 and real estate transactions in the area really started to slow. I didn’t want the lot sitting on the market for too long so we decided not to list.

Now there’s a strong part of me that is back to craving outside time and a tiny house. I wonder now if there’s more to real estate than making money and how cool would it be to have our own cabin in the mountains, but still be in the middle of a sweet community with hiking trails, a pool and playground. 

Although building costs have come down slightly, we’ve even been presented with a 5% cash back rebate offer, they are still high. Interest rates are still high – in the 7% range as of the time of writing. So really even if we wanted to build it would still be pricey! 

Cash is King

The silver lining here, well 2 silver linings is 1) I don’t think we’ve lost money on our lot and 2) we paid cash for it so thankfully we are not making payments feeling like we need to make a decision one way or another. I don’t love having an empty lot just sitting there but in the absence of better options right now we’re ok to let it hang there! 

Things change all the time so we’ll see how the rest of 2024 shakes out but for now I think we’re ok to sit tight! If we really do get the itch for outdoors and a tiny house, there are plenty of available tiny houses for us to rent in the same area!