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Tiny houses are all the rage. These uber-small homes have just enough space for a minimalist individual or small family. A tiny house business builds, sells and/or rents tiny houses to those looking for a place to live or stay.
Who is this business right for?
If you are interested in architecture, construction and/or real estate, this business is perfect for you. It is also quite appealing to those who pride themselves on staying up to date with the latest trends.
What happens during a typical day at a tiny house business?
A tiny house business owner orders building materials, manages builders, secures plots of land, buys/sells tiny homes and establishes relationships with suppliers. Some tiny house business owners even handle the accounting and marketing duties until the business reaches the point where professionals can be hired to handle these responsibilities.
What is the target market?
The ideal customer is an individual with an expansive budget and a desire for an upscale tiny home. In some instances it is possible to sell several tiny homes to a real estate investor who intends to “flip” those properties or use them as tiny house rentals/hotels.
How does a tiny house business make money?
Tiny house businesses make money by selling tiny homes to buyers. It is also possible to rent out tiny houses.
What is the growth potential for a tiny house business?
Tiny houses are as en vogue as it gets. Just about everyone wants to spend a night in a tiny house. Plenty of millennials are interested in these diminutive homes as permanent living spaces. Even baby boomers looking to downsize are interested in tiny houses. The potential for growth is exponential. If you build or acquire tiny homes in the next half-decade, they will almost assuredly sell at a profit. Capitalize on this trend now and you will be able to grow your tiny home company into a business empire across posterity. It is likely that tiny houses will remain popular far into the future as the population increases, space becomes more limited and traditional home values continue to soar.
What are some skills and experiences that will help you build a successful tiny house business?
Knowledge of home construction with a particular focus on tiny house construction will certainly help. Those who are familiar with the real estate nuances of their area will have a firm grasp on the local codes that apply to tiny houses and the best places to build these homes. It will also help to be a savvy marketer. Though many tiny homes sell themselves, making target customers aware of your tiny homes for sale is critically important.
What are the costs involved in opening a tiny house business?
The building materials are the primary expense. The construction of tiny houses requires an array of materials ranging from wood to nails, bricks, lighting, appliances, flooring and so on. An office for administrative functions will also be necessary. Your office needs computers, printers, desks, chairs and high-speed Internet. You will also need a team of tiny home builders to construct these cute little houses. Some tiny house builders buy the property upon which tiny houses are built. If you plan on purchasing such property before constructing the tiny houses, be sure to budget for these costly acquisitions of land.
What are the steps to start a tiny house business?
Once you're ready to start your tiny house business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your tiny house business is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your tiny house business keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a tiny house business?
Become familiar with your local building codes. Find out the specific regulations in your jurisdiction that pertain to tiny house construction, location and living. Hire your building team with care. Only select builders who understand the nuances of tiny home construction. If you aren't sure where to start and do not have experience with tiny houses, it is advisable to attend at tiny home workshop.
How to promote & market a tiny house business
Be selective when deciding on marketing methods. Tiny home-seekers tend to be young adults in their 20s or 30s. Target the mediums this age cohort is exposed to and you will maximize your marketing dollars. Of critical importance is your website and social media content. Millennials and other youngsters will almost certainly surf the web on over to your website and Facebook, and Twitter pages. Your web presence should be polished. Regularly update your social media accounts and website blog with helpful, intriguing keyword-laden content. Guest blog on other relevant websites to gain exposure.
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How to keep customers coming back
It is important to hold frequent open houses. Do not lose sight of the fact that investing in a tiny house is quite the difficult decision for the average home-seeker. After all, tiny houses are quite unorthodox. Learn all the nuances of your tiny homes for sale so you can explain how a prospective buyer can live in such a small space with considerable comfort.
How and when to build a team
You will need a team of tiny house builders right away. You can't build all these houses yourself. Furthermore, it will help to hire a real estate agent or tiny home expert to help you show the tiny houses you have for sale. If you do not want to answer the phone calls of prospective buyers throughout the day, it will be necessary to hire a receptionist. Hold off on hiring a marketing professional, accountant and administrator until your business ramps up.
Read our tiny house business hiring guide to learn about the different roles a tiny house business typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a tiny house business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
There are specific laws by state--and even by city--regulating where a tiny house can be built so that it is in compliance with zoning laws. The American Tiny House Association has a list of these regulations by state.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
Tiny house businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example of terms and conditions that one company includes in their services contract.
Here is OSHA’s guide for the construction industry. There are particular regulations for building a home that may be relevant to building tiny houses too.
It is recommended that you obtain liability insurance to protect yourself, contractors, and customers in the case of an accident.
How much can you charge customers?
Tiny houses sell in a price range between $5,000 and $50,000 or more. The exact price depends on the size, location, and amenities within the house. These diminutive homes are quite appealing to a wide variety of audiences. If you decide to rent out your tiny home as a hotel of sorts, you can charge upwards of $100 to $200 per night. People are willing to pay good money for a brief stay in a tiny house in order to determine if this style of living is appealing and also to find out what all the fuss is over.
What are the ongoing expenses for a tiny house business?
The cost of labor is one of the major tiny house business expenses. Your tiny house builders will require a wage of at least $12 to $15 per hour if not more. The construction foreman/manager will require a salary in the range of $45,000 to $100,000. You will have to hire a receptionist, administrator, marketing professional and accountant as time progresses. A receptionist and administrator will earn between $10 and $15 per hour. Marketing and accounting professionals typically earn between $35,000 and $55,000 per year.
You will need an office to conduct your tiny house business. This space will likely cost between $700 and $1,500 per month depending on its size and location. Utilities and high-speed Internet will cost between $150 and $250 per month. Budget in another couple hundred dollars per month for insurance. Constructing tiny homes requires building materials. The cost of these materials hinges on the number of tiny homes you plan on building. You will likely spend between $2,000 and $20,000 or more for each tiny house's building supplies. The exact cost hinges on the size of the tiny home along with its appliances and luxuries. If you plan on buying property and then building tiny homes on the land you purchase, your budget will be exponentially higher. Though tiny houses are small, the land upon which they are built can cost anywhere between $10,000 and $50,000 or more.
How much profit can a tiny house business make?
A tiny house business has the potential to make six figures right off the bat. The amount of profit your tiny house business makes hinges on overhead costs, the number of properties your team can build and the state of your local real estate market. Keep building and selling tiny homes and it is possible to turn your business in a multi-million dollar enterprise within half a decade.
How can you make your business more profitable?
If you have a tiny home on the market that few (or no) people bid on, consider renting it out. It is also possible to rent tiny houses as hotels. If you understand the intricacies of tiny house construction, you can make extra money by teaching others how to build these highly unique structures.