First thing I did was to cut a hole where I wanted the drain:

Here’s the drain pipe assembly:

I attached the drain pipe to the 2″x4″ with a strap for stability:

I fit the drain pipe into the hole again:

And then I used another strap to attach the rest under the house:

I ran some PEX tubing through the walls and put in garden hose sized male and female adapters with 1/4″ screw clamps:

For the water to enter the tiny house, I used a garden hose splitter. The left side goes to the PEX tubing which will go to the shower which is a propane powered portable hot water heater I got on Amazon. The right side has an attachment that will go to the line to the sink. I sealed all the threads with sealant for that purpose.

… and bolted the assembly to some blocking I added:

Here’s what it looks like on the outside (after I sealed it up with caulk):

Then I closed both the valves on the splitter and hooked up a garden hose. Water flows through and no leaks!

I originally was going to run a couple of different pipes and attachments together for the propane line for the shower. When I sized it up, turns out the included hose is long enough to reach by itself:

And this is where the propane tank will sit on the hitch:

And then I went back and sealed up the opening:

Next, I’m insulating the walls and putting in the bathroom walls.

The original reason I began building the tiny house was that a friend and I couldn’t get qualified for a mortgage to purchase a 4-plex as investment property with our self-employed incomes. And as a former real estate agent, investment property has been on my mind for a while now.

Maybe there's a tiny house behind there?

And while tiny houses have yet to hit the mainstream, increasing density inside the city limits is already on a lot of people’s minds.

The only solution I’ve seen around town so far are the mixed vertical use developments (The Triangle and The Domain) and the folks that bulldoze older homes on large lots to put in town homes (see the Google street view for 1704 Justin Lane for example).

Those town homes are nice looking though out of character with the neighborhoods. Even so, they’ve stopped building them due to the credit crunch. The only other thing increasing density right now are the condo high rises downtown that are completely unaffordable for most people.

Before I get to any numbers, let me state that I’m not a CPA, attorney, etc so I can’t be responsible for anything anyone does with this information. Anyway…

For a tiny house there’s the typical rental return on investment most people are aware of. If you buy a tiny house for $15,000 + 8.25% tax and rent it out for $500 a month plus utilities on your own property, it looks like this:

$6,000 annual rental income / $16,238 purchase price = 37% return on your investment each year

If you have to rent land, maybe you pay $100 a month and get a 30% ROI. It’s win-win for the land owner too because they basically get $100 a month for letting someone have access to an unused part of their land. You’d probably want to put a separate meter on the electricity so you’d know how much to charge for shared utilities.

Understand that this takes the major risk out of investment property which is paying the mortgage during vacancies. Yes, your return is less, but you’re not out of pocket the minimum $1000 or so you’d have from a single family dwelling.

That’s the reason plexes can be safer and more profitable investment options – if one person moves out, the other 3 tenants are still covering the mortgage until you find another.

But then there’s tax depreciation. If you’re not as interested in the details, skip down to where I show the final potential returns.

Recall that this isn’t real estate so it depreciates much more quickly. IRS Publication 946 explains how to depreciate property. Our tiny house classification is as a trailer so we go to the classification tables (B-1) and see trailers are asset class 00.27.

Table B-2 is the classification based on use which I’d say is construction (15.0). Both classifications say the GDS recovery period is 5 years. GDS is the option you’d use under most circumstances (i.e. you’re using it inside the US).

For a 5 year depreciation, you have two basic options – straight line and percentage. You can depreciate at 200% or 150% rates. I’ll compare straight line and 200% here.

The straight line depreciation table is A-9 and gives you 17.5% depreciation the first year, 20% the next four and 2.5% the 6th. 200% depreciation (Table A-2) gives you 35%, 28%, 15.6%, 11.01% (2 years) and 1.38% rates.

Straight line depreciation:

Year 1: $2,841
Years 2-5: $$3,247
Year 6: $406

200% depreciation:

Year 1: $5,683
Year 2: $4,547
Year 3: $2,533
Years 4-5: $1,788
Year 6: $224

If you’re planning to keep the investment for 3 years and then sell it, you’d benefit from the percentage depreciation. If you want steady depreciation over 5 years, do straight line.

Let’s look at our ROI again with depreciation included:

Year 1 SL: ($6,000 rental income + $2,841 depreciation) / $16,238 sale price = 54% ROI
Years 2-5 SL: 57% ROI
Year 6 SL: 39% ROI

Understand that even if your tiny house is completely vacant for a full year between years 2-5, you’d still be getting tax benefits equal to a 20% ROI. Crazy tax system, huh? How are those safe investments looking now?

Here are the numbers with the 200% rate:

Year1 %: 72% ROI
Year 2 %: 65% ROI
Year 3 %: 53% ROI
Years 4-5 %: 48% ROI
Year 6 %: 38% ROI

Rental rates will vary from city to city. If you can only rent it for $300 a month, you’re looking at a 42% return (in a 20% depreciate rate year). But if you lived anywhere near downtown Austin, $600 or more would be completely reasonable giving you 64% ROI (and 79% ROI the first year of 200%).

Now let’s assume you have good enough credit that you can get a consumer loan with a 20% down payment of $3,247. For simplicity, I won’t include any fees such a loan might run you. Redo all those calculations above with an initial $3K investment and reduce the rental income by $250 (5 year loan on $13K at 6% interest). Obviously a longer term loan or lower interest rate would boost your return.

Even with a $250 payment, rental income of $300 a month would still give you a 118% ROI in a 20% year. Rental income of $600 a month would give you a 229% ROI. I imagine there aren’t that many 200% ROI opportunities in real estate right now.

Recall that worst case scenario, you pay all cash, have it sit vacant with no payment and still get a 20% ROI. As long as you could document a date for having put it to a business use, you should be fine.

All that said, I think tiny houses are one of the best opportunities for small time investors right now. If I end up being able to partner with the right folks so that we can ramp up production, it could be a great opportunity for larger investors too.

There are already pictures up from previous posts but this will give you a live view of everything. I figured this would be a good one before I sealed up the walls.

It consists of a weather proof plug to the outside for a 15A extension cord, a GFCI circuit box, a 15A circuit breaker, 6 switches, 5 outlets (receptacles) and places for 6 lights to be installed once I install the ceiling.

I tested it all too. It was like magic the first time I plugged it in, reset the GFCI and heard the fan turn on. The bath fan is operational too.

The reasoning for the circuit breaker was so that if the occupant overloads the circuit, they can restart it there in the closet rather than having to go find the circuit breaker in the main house or other system. Just unplug something, flip the breaker back on and you’re in business.

Here are some pictures of it. This is the exterior plug at the moment. I’ll go back and put in some foam insulation. You can see the ground wire going up that goes to the trailer frame:

Then this is the GFCI and breaker box. I left the box open here but it will be sealed with a removable cover normally. The entire circuit for the house goes through both of these for safety.

Here’s the bath fan. The light gets plugged in after I install the ceiling. The fan and the light are on the same switch.

Here are one of the two double switches. This one turns on the porch light and the living room and study lights. The other double switch turn on the hall/pantry lights and the closet light.

This picture shows the nailing plates covering the wire, a receptacle and the foam insulation I’m using between the wall and the trailer frame:

And finally… we have light!

That’s one of the LED lights I plan to install in to light up the living room. There are two of those and a few box shaped ones for the hall/pantry, study, porch and closet. I was going to install one in the loft two but opted to leave an outlet and switch up there instead so the occupant can put their favorite lamp there.

And you can see in this final picture that I covered the supporting post with 1x4s and 1x6s to make it look nice. I also put in one more framing board on the top though it’s not pictured here:

The next day, I went back and moved the runners for the stairs out to the ends and added a bigger cross support board to make them more stable.

Now I’m working on the wiring. I’ll see if I can’t post a video for that. It’s also supposed to rain all week so I’ll have to see how much I can get done.

It caused the theme I was using to break and the blog reverted to the new default theme for WP 3.0. While it’s a nice theme, it’s not what I was looking for.

So I went and reconfigured a new theme. And while I was at it, I went ahead and added my gravatar (the little picture next to my comments) and an opt in box if you’d like to get an email whenever an update is posted here.

Here’s a drawing of what I’m working with:

If you notice the top right is the bathroom. That double circle is the toilet. The space in the top left will be the closet. Between the two against the top wall will be the pantry. The bathroom and pantry will both have their own little windows. The breaker box will be in the closet.

Here’s the framing for those rooms:

The bathroom will have a swinging glass shower door and be totally water proof inside. It will have a switch to turn on the light and fan that vents to the outside. You can set those up on separate switches but for simplicity’s sake (and to ensure the house gets adequate ventilation), I’m making it one. I figure anything done in the bathroom would be better vented to the outside anyway.

Next, I’ll be putting in the utilities. There will be five outlets (receptacles), 5 switches and 9 lights, if I recall correctly. I’ll also be piping in water and gas. I spent about 5 hours at Lowe’s the other day just getting all the right connectors and supplies. And weather permitting (and World Cup permitting), I’ll finish the exterior trim too.

First off, I cut the window holes:

Next I wrapped the house with the roofing tar paper. It’s actually organic felt dipped in asphalt. I’d think dipping it in asphalt should disqualify it from using the term organic but whatever.

Most houses use Tyvek waterproof wrap as a moisture barrier. The issue with that is that I read that using Tyvek subjects a building to a greater risk of trapping condensation inside and promoting mold. That’s especially a concern with a small space as we have here. So I opted for a more breathable wrapping with the tar paper.

At the same time, I don’t want drafts so I went through and caulked the major seams in the roofing:

After the wrapping was on, I installed the windows:

And blocked in the wheel wells:

I got all light blue siding so it would have a Mediterranean feel as well as not absorb too much sun to keep the cooling costs down. It’s more or less summer here in Texas from around May until October so avoiding heat is more a concern than collecting it for winter.

I painted the J-channel and corners white to accentuate the design. I realized that I should have just ordered those parts in white to begin with. Here, I’ve added the painted parts:

And then here are some progress and completed siding pictures:

When I was nearing the top, I realized I hadn’t known enough about siding at the time to order undersill. It turned out though that the overhang of the rafters were enough to tuck the siding into. And then I’ll cover that part with some 1×4 trim.

It occurred to me that I ought to put a ceiling over the entryway before I put the roof on. Here’s what that looks like:

Then I installed the loft. I’d worked the supports for the joists into the wall framing already so all I had to do was attach those and then attach some OSB over the top:

Here’s the entryway ceiling from the top along with the hurricane clips to give the rafters extra support. You typically install the clips on the inside of the wall but with the pitch of the roof that wouldn’t have worked.

I used metal clips for all the major joints in the roof. I measured it all out and attached the clips before assembling it up on the house:

Here’s me attaching the first two rafters to give the ridge support. They were held in place with the hurricane clips until the ridge was attached:

Once the supports were ready, I moved the ridge up onto the loft and entryway ceiling before lifting it into place:

And the ridge attached:

I installed a cat walk between the loft and entryway ceiling so I could get back and forth. I ended up needed to use two of those 2x4s so now it’s just 2 wide under the completed roof:

A book on framing let me know I needed to add blocking here. I’ll go back and fill in with some spray foam later to fill in the cracks and keep the drafts out. This blocking was screwed in on one side and attached with that metal tie there on the other:

Here we are with all the rafters and the fascia installed. Let me tell you, clamps really saved my life on some of these steps. Below you can see what I think is called the end gable or something. That was attached to the fascia and ridge to give an overhang appearance and keep rain from falling directly down the siding.

I must have been having a bad day or something because I had to measure and cut 3 different sets of those. I’d measure and cut but when I got it up there, it just didn’t fit the way I’d measured for some reason.

I sawed and chiseled out a space to attach some 2x4s to the end to make sure those gable ends aren’t coming off:

Here’s one of those steps that required clamps since I’m doing this alone. These blocks were to hold the OSB up on the roof once I pulled it up and put it into place:

This was how I lifted all the OSB onto the roof. This piece was fine but the 4×8 sheets were killer especially trying to move them around the protruding clamps. One book recommended this c-clamp method but then dragging it up the ladder behind you. That seems like it would have been harder though. I did that with the smaller, lighter roof panels and can’t imagine doing that with the OSB.

What I did do that made this part easier was to tie knots in the rope so I could pull a distance and worry less about my grip slipping. That made a huge difference. Probably using a bigger rope would have made it easier too.

Once I started getting to the pieces at the top, I had to climb out onto the roof to attach it. Here’s the system I used for that and the rest of the roofing work. It was a climbing harness and strap that I looped through a carabiner a couple of times. I attached the strap to the metal frame of the trailer on the opposite side.

I cut the roofing felt ahead of time and stapled and unrolled it a little bit at a time while keeping the roll on one leg of the ladder:

And here’s the completed metal roof. I chose white for the heat reflection. I’ll go back and paint the screws white to match later. I’m excited though that I shouldn’t have to climb back up on top of the roof.

If I had it to do over again, I probably would have made the walls higher and the roof pitch lower. That will take more planning but climbing on the roof would be easier and that would leave more head space in the loft inside. This higher pitch is okay though because any rain or snow (or frisbees for that matter) won’t stay up there as long.