In this series, NerdWallet interviews new homeowners across the country about their unique buying journeys and the financial decisions that have helped them along the way. E-mail [email protected] to share your first-time home buying story.
HGTV shows popularized small homes – typically those under 400 square feet – in a big way. Many people are drawn to this alternative route to homeownership as a way to save money before committing to more expensive property.
However, getting a small home differs from the process of buying a typical home in several ways (for example, you’re unlikely to find a real estate agent who can show you a dozen options). The process can be logistically and financially complex, so it’s important to know what you’re signing up for.
Annie Colpitts, a 30-year-old marketing coordinator, spent over a year in an 8-1 / 2-foot by 20-foot home that she designed and helped build. She lives 20 minutes north of Richmond, Virginia, and parks the house on a small private property that she rents for $ 350 a month. Colpitts moved from a spacious downtown apartment – and suspended plans to buy a conventional home – to embrace this new way of life.
To find out more, we asked Colpitts to share why she chose a tiny house, how she financed it, and what she would have done differently. (This transcript has been edited slightly for clarity and length.)
Why were you interested in a mini-house?
I had been thinking about buying a house in Richmond, but a friend had a really terrible home buying experience involving some major hidden issues like mold and termite damage which made me reconsider. The scale of a tiny house seemed so much more manageable.
I was also following “Van life” on social media for a while and related to the idea of tiny life. I already lived in a fairly minimalist way. As much as I loved the idea of living in a van on the road, so much I do a job that does not fit a nomadic lifestyle, and downsizing to a fully mobile situation seemed unnecessary for my situation. .
What was your life situation like before?
I had always rented and bounced in a few different places in Richmond since I graduated from college. My last apartment was in the heart of downtown, and it was a pretty fancy one bedroom apartment with plenty of space for me [roughly around 700 square feet]. It was also cheap [$750 a month, excluding electricity and internet]. I didn’t really have a reason to leave this life situation, except that I felt like I was renting a space that wasn’t mine, and I wanted a space of my own that I could change if I wanted to. . Also, in my job, I had worked with architects for the past five years, and being around them inspired me to create a house.
Can you describe the process and the timeline?
The whole process took about a year. I first came up with the idea in November 2017. I knew I wanted to create my own floor plan and design it myself, so I spent the first few months researching floor plans. About six months into the process, around May 2018, I contacted the bank for a loan. I moved into the house in December 2018.
Why did you decide to build your house?
A lot of people will be piecing together a small house in their backyard or buying from builders who do it all from start to finish, but my finances weren’t planned for that. I needed to exchange my rent payments for loan payments fairly immediately. I found a builder that offered a more affordable process – which they don’t do anymore – by taking my floor plan and letting me build parts of the house. They handled things like ordering windows and installing electrical and plumbing, then let me do some of the more labor-intensive and least skilled jobs.
During this “week of construction,” my father and sister went out with me to their establishment in Tennessee. We worked 10 hours a day for six straight days on the siding, interior wainscoting and more. The final house was delivered to me two months later. Through this process, I feel like I have a better understanding of my home in general.
What is your overall approach to finance?
I became a minimalist by circumstance and not by choice. For a long time I was in the non-profit world so I worked long hours and barely got paid. I am grateful that I have a job now where the amount of money I earn is not an issue, but I continue to buy only what I need. I’m so thankful that I didn’t have student loans – my parents set up a college fund for me – and I decided not to do a graduate degree.
How did you finance the mini-house?
This is notoriously one of the most difficult parts of the process. Tiny homes have been created to live in the gray area between mobile homes and real homes, making it difficult to finance them. Mini-home inspection processes are still so new compared to mobile and traditional homes, so lenders may be hesitant to finance a home that is insecure or may collapse.
My initial all-inclusive budget was $ 35,000. i went on small mortgage route and got one for $ 28,000, which covered about 80% of the construction costs. I wanted to build the little house imminently, but had no initial savings to do so. My family has a great relationship with a local bank that we have been using for 30 years. The bank had never given small home loans before, but they knew it was becoming more and more of a thing and were willing to try it with me. We made a Insecure consumer credit and my parents were co-signers. I’m probably paying a little more interest than if I had gone for a secured loan or a mortgage, but I didn’t have to put any effort into getting the loan because there was already confidence on both sides.
To save for the rest, I did a lot of dog walking, house sitting, took on as many temp agency jobs as I could, and sold stuff. I also made a lot of side applications – carpooling, food delivery, etc. – and I saved aggressively from my normal job.
How far are you in repaying the loan?
I’m about a third of my loan repayment. I had hoped to pay more aggressively, but last year I was underemployed. I had a stable job, but they had cut my hours, so I did some side work to pay my bills. I was breaking even every month and didn’t have a lot of extra money to pay off more than the principal. But now that I have started a new job this year, I would like to pay it off in 2021. The deadline for paying everything is 2024, but the sooner the better.
Were there any surprises? Would you have done something differently?
I initially had a vivid image of laying in the attic and staring at the stars through a skylight, but skylights in small houses are a bad idea. I paid the upgrade to have a skylight, and it leaked the first day I moved in. It was not installed correctly and I woke up that first night with wet feet. They tried to fix it, but I ended up removing it and have slept so much better since then.
What are your long term goals for the cottage?
I’ll live like this until it doesn’t work for me anymore. Some people move into tiny houses until they pay off all their money. debt [by saving on higher mortgage payments or rent] and then they can buy a house, but I don’t have that kind of philosophy. I love him right now. I would like to buy land and move my little house there and have more property and privacy.
But who knows? It is possible that life circumstances dictate a change. I don’t need to involve anyone in this way of life as I currently don’t have any pets or boyfriends. If there is anyone I need to host in the future, I will cross this bridge when I get there.
How has your life changed since you moved into your mini-house?
I have so much more space in my head. It might also be because I no longer live in the city, but I come home and immediately feel calm. This is my retirement. I didn’t have Wi-Fi for the first year, so I had a lot of analog time. I’m more intentional with what I fill my life with, both in terms of time and things. Now I can go to Target and only buy one thing.
What advice would you give to someone interested in a mini-house?
You don’t have to wait for a tiny house to start living tiny. If you wait for the new physical location to start making these changes, it will be such a culture shock. While I was living in my apartment, I spent a year getting rid of my things and getting used to living on less.
I also stayed in a tiny house the same size as the house I wanted to build, and that was so crucial. You can make floor plans until the cows come home, but you have to try out the space to find out how you’ll feel.
Photos courtesy of Annie Colpitts.