George Kamel - The Only Way To Afford A Home?

Episode Date: July 19, 2023

As the dream of owning a home seems to be moving away, people are considering trendy options like tiny houses. Today, we will explore the hidden costs and limitations of tiny houses and see if they are the answer to affordable home ownership. Links: Ramsey Real Estate Hub I love a good deal, when you sign up using this link, I’ll hook you up with a 14-day free trial and $15 off your first year of the premium version of EveryDollar.   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Is the dream of home ownership drifting further and further away with each passing day? But what if I told you you can buy a home in the U.S. right now for $50,000? What? No! That is, if you count, tiny homes. You remember Tiny Homes, right? They hit it big in the 2010s with series like Tiny House Nation and Tiny House Big Living, which turns out not a spinoff of Little People big world. Both great shows, though.

But unlike Gangham Style and other fads of the 2010s that quickly went out of style, the tiny home craze aged like the dimple king Mario Lopez himself, still crushing it at 49 years old. You guys got the fountain of youth. Well, Screech, it took a lot of patience and a lot of flies. Nowadays, tiny homes come in all shapes and sizes, and they average around 225 square feet, but can go up to 600 square feet.

They're customized RVs, school buses that have been renovated, trailers, shipping containers, and more. And they can be built from the ground up or with kits you can conveniently get at places like Home Depot and even Amazon. And yes, the tiny home trend initially attracted the unshowered type who wanted to live with less and roam mortgage-free, just hacky-sacking their way across America. But today, more and more people are looking at tiny homes as the only way they'll be able to afford home ownership. And in a real estate market where the median home price is close to $400,000,

it's not hard to see where they're coming from. In fact, 86% of people surveyed said they would move into a tiny home, and over half of them said the major reason was affordability. Between 2022 and 2026, the market for tiny homes is expected to grow by $3.57 billion, with a B. And even our billionaire pal Elon Musk has gotten in on this tiny home game by purchasing a casita from the first factory-built housing company, Boxable. Which, by the way, has 120,000 customers on the waiting list for said casitas. Do they think these casitas are like the magical anthropomorphic ones from Enkanto? We're trying to make our house dreams come true, not fall apart. So the question of the day, our tiny house is the solution to your home ownership problem.

Well, I'm going to share the definitive answer in today's episode. But first, remember that sharing is caring. So share this video with your old hacky sack gang to remind them of the good times. And while you're at it, hit like and subscribe so the algorithm fills your feed with more hacky sack-based content. So first, let's talk about building a tiny home. I wish it was as easy as slapping a few pieces of gingerbread together with some royal icing and hot glue. But it turns out there's a bit more to it. The median price of a tiny home is now around $45,000.

But most tiny homes start around $28,000 and can go all the way up to $150,000 depending on where you live. And just like with any home, you get what you pay for. Now, you might be thinking, how can a home that's around 250 square feet cost over $150,000? Well, it's often because of customization to fit the owner's lifestyle. I'm talking about the ones you see on HDTV that you'd actually want to live in. So if you want your tiny house to have a rooftop patio or a granite-tiled rain shower, you're going to pay top dollar for that. Plus, if you want to make the most of your space,

and you do, you're going to want your house to be multifunctional. Maybe the bookcase doubles as the stairs to your loft. I mean, even if you're a minimalist, you still need instant access to all four Twilight novels. Or maybe the wall pulls out into a writing desk for that YA fantasy romance saga you've been working on. The possibilities are endless. And unless you're Tim the Toolman Taylor,

the cost of home customization ain't cheap. But if you'd be happy with a run-in-the-mill rectangle you turn into a home, a tiny home kit could help. But remember, the kit doesn't always include necessities like doors and windows. Literally doors. Oh, and electrical and plumbing. Yeah, it won't come with those things either.

But hey, you could always go old school and build an even tinier home behind your tiny home for all of your lavatorial needs. Some fun! And then you've got to think about the cost of where you put this thing. You can't just pull a Dorothy and plop your house Willie Nilly and Munchkin land. There's rules. There's regulations. There's witches to consider. Things like the cost to buy or rent a lot of land, plus whatever the state and city is charging for land permits and licenses.

Let's use these reviews to show you some of the downsides. Don't lie to me, said, one star. Pathetic. This is not a house. It is a shell labeled as a house to entice buyers. You don't get mechanical, electrical, or plumbing. By the time you add in all the items needed to attempt to make it a house and permit it, the price per square foot is not worth it.

Don't be fooled by the price people. You heard it here first. Don't be fooled by the rocks that she got or the rocks that she's going to have to pay for to get someone to install the rocks. Next review by Carlos. Two stars, just the outside. So here I go thinking I'm buying the entire thing, turns out that you just get the bones.

I don't know why he gave it two stars. What bumped it from one to two for Carlos? I guess bones are worth something these days. So these reviews are hinting out why I think tiny homes aren't the right path to home ownership. And to be clear, I love tiny things. Heck, I'm tiny thing. In fact, I do all of my official business with this tiny briefcase.

And yes, the clasps are fully functional. And what's inside of here, you might ask? Well, it's where I store my emergency $1. For all of my emergency $1 needs, and it's none of your business, it's my business. Meeting adjourned. Good day, sir! But when it comes to homes,

Tiny ain't cutting it. And here are the reasons why I think a tiny home is not the smartest path to homeownership. Number one, it's not as easy as it looks, and it's more expensive than it seems. These kits don't include mechanical, electrical, plumbing, and labor costs. Not to mention the price of the land

you've got to put this thing on. And that dirt is easy. expensive. Reason number two, unlike regular homes, tiny homes don't appreciate in value. If it's on wheels, its value basically drops at the same rate as an RV or a truck. Heck, even if it's built on a foundation, a tiny home still won't increase much in value because value is determined by market demand, which truthfully isn't huge for tiny homes. Reason number three, you're going to have a hard time finding a super specific buyer for your tiny home super specific customizations in your super specific location. That custom cat castle you built for Bobo will be worthless to almost the entire

global population. So unless your tiny house is sitting on the most desirable piece of land in the United States and you own that land, you're probably not going to see your home value go up. Bummer. This is a bummer, man. That's a bummer. So let's just say tiny homes aren't worth it as a long-term investment, which is how you should look at home ownership. Now, I will say if you already have a paid-for house and you want to buy a tiny home as an adventure, a new lifestyle choice, or an Airbnb investment, knock yourself out. I'm all for that. But if you're going to do it, pay cash. Don't take out a loan on a

depreciating asset. Just don't be surprised that the investment you make in that tiny house isn't so tiny. And don't forget, the investment you're making at this point is more about the lifestyle than the money you're going to make at resale. So if you truly need a place to live but aren't ready to buy a real house, just rent. Now, you've probably been told that you're throwing away money on rent, but renting a home or apartment for a season is not wasting money. It's buying patience. and that patience is priceless. Because if you're drowning in debt or don't have a down payment saved or can't afford home maintenance and repairs,

you are not in a position to buy a house. Straight up. Bottom line, end of story, period. So before you buy a home, you need to make sure your financial house is in order. And that starts with getting out of debt. All of it, including the $7 you owe Randy on Venmo, including the student loans that you're hoping get forgiven, including the credit card balance,

including the personal loan, the medical bills, all of it. Get it out of your life. Next, save up an emergency fund of three to six. months of expenses. Once you're done with that, you can start saving up for that down payment. Now, for first-time home buyers, I recommend at least 5 to 10% down on a 15-year fixed-rate mortgage. If you can save 20% down, even better. That way, you can avoid private mortgage insurance, which could save you a couple of hundred bucks every single month. And when you're trying to decide on what you should spend on a house, make sure that your mortgage payment, including

principal, interest, property taxes, homeowners insurance, PMI, HOA fees, will be 25% or less of your after-tax monthly income. It is much wiser to wait to buy until you're financially ready than to buy more house than you can afford right now. Or a tiny house that's not going to help you reach your money goals either. Trust me, you will not regret waiting until you're ready, especially when it comes to your house. You want that thing to be a blessing, not a burden. And if you're in the market for a house or you just want to learn more about the buying and selling process, be sure to check out the Ramsey Real Estate Hub.

There's a ton of free tools and resources to help you out on this home ownership journey. It's all free. I'll drop a link for you below in the description. As always, make sure to subscribe. to this channel, like this video, and share it with your friends who are always complaining about how small their apartment is. It could be smaller.

Thank you guys for watching. We'll see you next time.