Tiny homes a solution that requires a new financial plan

Tiny houses, like this one built by Kristen Bain in Wanaka, are a solution to the housing crisis. Photo / supplied

OPINION:

The appeal of a tiny house is clear, at least to me. But there's a devil in the detail that fans need to be aware of.

First, the pros.

It's clearly a cheaper solution. You don't have to buy the land, as you're just building a small home to your own specifications.

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You can even build it yourself, including only the things that matter to you, but keeping the things that make it feel little-leagues luxe.

It's technically a vehicle, rather than a building. This means there's less waiting around for consents, and then having to pay for them.

That also means you can pack up and move whenever you want a change of scenery. A friend's glorious garden? A sea view? Some native bush?

You might need a grey water outlet and electricity to plug into, or you might even be so self-contained that those are taken care of, through solar or a composting toilet. It's your tiny house. You can choose.

But in that cheaper solution, is exactly the problem that can creep up on you with tiny houses.

You're not buying the land under the house, which is actually the valuable part. That's also the part that grows in value the most.

Because a tiny house is technically a vehicle, it's actually most likely to go down in value over time.

For most New Zealanders, their home is their biggest asset. Whether or not I agree with that strategy (I personally don't) it's still a fact that that's how we treat it.

So in order for the tiny home plan to work, creating another financial plan is probably a good idea.

Creating a different strategy for building wealth can give peace of mind, particularly if at any point you decide that you want to change out of the tiny home lifestyle.

Whether you're thinking about retirement, early financial independence, or an eventual regular-sized house, buying property is far from the only way to get there. It's just the default setting for most people.

Investing in shares or building a business are two options that could balance out the lack of property.

The good thing is that both of those can also be done on the cheap – particularly if you were to put your household cost savings into a shares account.

Living in a tiny house could save you hundreds in rent, and potentially even more on power bills. If you were to put that into other investments, then leave it to grow, you could build a substantial nest egg quite quickly.

Then you could live your tiny house dream while still having financial peace of mind.

That's called a win-win.

This article is general information only, not financial advice.

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