Tiny homes have been around for a few years now, and the designs of these tiny living spaces never cease to amaze me. However, I’ve noticed that many tiny home builders have come and gone. Although it is easy to find kits and shed builders who sell Tiny Home shells, finished, out of the box, ready to occupy Tiny Homes has been a challenge for builders.
The lack of standardization can make a Tiny Home more costly per square foot than comparable RVs and luxury homes. However, the most significant difference between the two is that most RVs are highly self-sufficient and have onboard sewage tanks, water tanks, and power. Therefore, a Tiny Home can be equipped the same as an RV, but there is a cost, and it’s not low.
Unlike an RV, most tiny homes use more traditional plumbing and electrical systems. Without expensive upgrades, such as solar panels, inverters, generators, macerating toilets, water, black, and grey water tanks, they can’t be used off the grid or in some RV, mobile home parks, and neighborhoods.
When selling Tiny Homes, you must consider whether to sell a kit, a finished product, or units at any level of completion. There are several ways to increase your profit margin from a base kit. Offering different levels of completion is one of them.
Whether you want to merely knock out a couple of Tiny Homes a year for a little extra income or as a way to become a millionaire, the potential is there with Tiny Homes.
We Are Breaking Down the Cost of Building a Tiny Home!
The retail price of a tiny home ranges from $30,000 to $60,000. The price you sell a unit for will depend on selling a shell or a finished product.
The size, design, and customer options are factors in the retail price and the gap between the cost to build and profit on selling a Tiny Home. Adding options and selling upgrades can increase the profit margin for every Tiny Home you sell.
Offering Tiny Homes with some of the benefits of an RV will add costs and increase profits. Ready to go, off-grid power, from solar, wind, a generator, or combining them are possible upgrades for tiny homes.
According to the Spruce, the average wholesale cost of a tiny home is about $23,000. So, if you can build one at that average price and sell it for $56,000, you can realize a profit of $23,000, and that’s not too bad. Do that ten times a year, and you can make a profit of $100,000.
Of course, that wholesale cost is for a shell of a little house. It doesn’t include much in amenities, so the sales price and profit margin increase once you add a kitchen, bath, electrical, and other niceties.
Costs to Make/Manufacture
- Labor – equals 500 hours times 20 dollars per hour, equals $10,000, which is about 12.5 weeks for one person. That one employee will cost $41,600 a year before payroll tax. If that employee is you, well, you need to pay yourself, too.
- Materials – will cost between $15000 and $30000 and will go higher if you offer a high level of customization that includes the ability for the Tiny Home to be comfortable when off the grid.
- Admin – someone to sit at a desk and hold down the fort will cost you a minimum of $15 per hour. So, for a forty-hour week, that cost is $600 without benefits or payroll taxes.
- Office Costs – Throw in $150 to $250 per month for high-speed internet, $200 a month for power, and another $100 a month for other utilities.
- Building rent – will be one of your highest costs. Unless you plan on building tiny homes in your backyard, a location that can accommodate the construction of tiny homes is necessary. So is an office, and the two will cost a minimum of $1,000 per month if you are fortunate.
- Marketing – costs for marketing typically run between one and five percent of annual sales. One can only use projected sales for their first year when preparing a marketing budget for Tiny Home sales. For example, suppose you forecast a million dollars ($1,000,000) in sales your first year and spend one percent of projected sales. In that case, your budget for marketing would be $10,000.
- Foundational costs – one necessary cost of building a tiny home is a trailer built on one. If that is how you intend to sell a tiny house, a quality trailer is essential. A new 6×14 double axle trailer will cost a minimum of $2,500. If you desire to make larger houses, the fifth-wheel trailer Tiny Homes can be up to forty feet long.
Arriving at the Tiny House Profit Margin
You could search for that question and get a dozen answers, including one to believe that there is not one. However, like every business that ever opened its doors, no two of us do business the same way. In addition, the volatility of material costs can skew a profit margin in less than thirty days.
The design of a tiny home is also a factor in its cost, and for customers who want to upgrade fixtures and features, the price can get very steep, and you will make more profit.
However, every expense of building a tiny home is measurable. Based on the above information, the cost of opening your doors for the first year will be a little more than $100,000. If you make a profit of $20,000 per unit, you will need to sell five to break even.
To produce that number of units per year, you will need two builders. However, if you work without a fixed salary, the profit is yours instead of a second builder’s compensation.
Is a Tiny Home Business Profitable?
It can be, and even if you are making a few a year, the potential for a good income is there. It appears that the Tiny Home trend is not going anywhere. With rents higher than they’ve ever been and a housing shortage, a Tiny House business is a great business to start!