Anyone that’s been on the planet for awhile knows how cyclical the housing market is. It resembles a “sign wave”, where the market goes up (along with house prices), then levels off, then starts heading downward. Remember the financial crash of 2008? Soon afterwards, millions of people found themselves with negative equity, and faced with foreclosure. As I write this (March 2017), we appear to have a healthy housing market, but the prices of housing has increased to the point where “newbies” are having a hard time qualifying for a mortgage. At some point, (I predict late 2018), the prices will level off, and we will be headed for another downturn.
Traditionally, the rule of thumb was that housing should not exceed 25% of one’s household income. Today, this has increased to as much as 50%. Under these conditions, there is no “wiggle room”. You had better like your job, since if you you quit or get fired, you’d better find another source of income quick, or face the hard realities of selling your house or facing foreclosure.
So, how do you eliminate this roller coaster ride? Buy a tiny house! Forget about a 30-year mortgage. You can pay off a tiny house within 10 years.
What about land, you ask? There are several options here. Many municipalities are modifying the zoning laws to allow tiny homes to occupy space in backyards, city lots, etc. Go on Craigslist and look at land for sale in your area. There’s plenty of affordable land out there, with terms that are pretty attractive if you look hard enough. Try to find a FSBO (For Sale By Owner). Chances are you can strike a deal directly with the owner without going through a realtor. But, do your due diligence! Check with the local zoning laws to make sure it would allow tiny houses on the property. You may need to invest in a septic system if there is no sewer connection. Plus, don’t forget the water and power! In lieu of a well, water can be delivered to your property. Here, you will need a water tank of reasonable size (> 1000 gallons). Power can either be provided by the local power company, or you can go “off-grid”.
Another alternative here is to find RV and mobile home parks in your area, and ask if they would accept a tiny home. I found that many are open to these, since they are much nicer looking than many RV’s (especially the older ones). Here, the power, water and sewer will be supplied for you. Rent for the space will cost you anywhere from about $100/month to $750/month, depending on location.
Remember: It’s not how much you make, it’s how much you save.
So, let’s say you bought your tiny home, was able to finance it for $250/month. A local RV park has agreed to rent to you for $250/month. Your total housing cost now is $500/month plus utilities (most parks include your water, sewer and trash, leaving you to pay for the electric).
Now, using the ol’ “rule of the thumb” housing calculator, $500/.25 = $2000/month. In other words this is what you need to earn to comfortably afford your housing. Breaking this down to an hourly rate (assuming you are working 40 hours/week), yields $12.50/hr. Well, guess what? In many areas of the country, that’s minimum wage! In other words, anyone capable of working a 40-hour week, can own a home! See how easy it is to get off the roller coaster?