The road less traveled
Over the last few years, we have seen tiny house builder start-ups and seen some of their efforts littered on Craiglist, Tiny House Listings, or listed on blogs about tiny houses, as well as on Facebook pages.
The tiny house movement simply put is a social movement where people are downsizing the space that they live in. And this movement has created a lot of cottage businesses related to the tiny house movement. In the movement you find the purist, the DIY person, the back yard mechanic, the wannabe builder, project manager, and the builder; all with their wanting a sense of community, to be around or associated with like-minded folks.
“a person who has very strong ideas about what is correct or acceptable and who usually opposes changes to traditional methods and practices”
The purist is a person that downsizes for many reason of austerity, ecological, simplifying, and often feel that they and others must build the tiny houses themselves for as small an investments as possible. This group searches out the best deals, recycled products, pallets and does all the work for themselves.
“the activity of doing or making something (as in woodworking or home repair) without professional training or assistance; broadly : an activity in which one does something oneself or on one’s own initiative”
The DIY is a person that downsizes for many reasons and often feel that they must build the tiny houses themselves just for the joy of creating and being able to look back and say, “I built that” His costs may also range from $47 to $166 per sqft foot and more. S/he cost will often exceed this range in they will make changes because they want something different and this more costly.
I have noticed that just about anyone that can pick up a hammer thinks of themselves at least as a DIY individual. I developed a lot of my skill sets from the many projects I did over the years; remodeling 3 homes, building 1, and often learning new skills because of the attitude, “I can do that!” So, the following song is one of my favorites, as I started many projects with just a tiny idea and would see it morph into a huge project that was really fun and creative to do. It gave me a sense of pride when done. This tune by Johnny Cash is for all the DIY and Purist tiny house people out there.
Back Yard Mechanic;
A worker who is skilled in the use of tools, machines, equipment, etc.
The back yard mechanic often works outside the rules, carries little to no insurance, offers no guarantees/warranties on workmanship or products. He often works on the project in his spare time, evenings, and weekends and does not carry or maintain a license. He may or may not have training to fulfil the crafts involved and will often “wing it” The risk side is definitely on the buyer and should trigger a “buyer beware” warning.
And one can find some great companies and groups have started a thriving business in their garage; Amazon, Apple, Intel, Disney, Google, Harley Davidson, Hewlett-Packard, Lotus Cars, Maglit are just a few that have made it big.
I added this group as some build tiny houses with marketing, websites, and social media much like a builder, and yet have not made the commitment to take it to the next level. They often are trying to earn a living, put food on the table and are willing and boast about undercutting competition by thousands of dollars. They, of course, turn it around that they can save you thousands of dollars. But more often than not, they are attempting to work at a livable wage standard. They often work with a handshake or verbal agreement.
The PM has the primary responsibility of planning a particular construction job and overseeing its progress along the way. A construction project manager sets up the estimates, the budgets and the construction timetable for the client and develops the construction strategy. He selects the subcontractors and workers, and provides required explanations for the builders and other professionals associated with the project. When delays or problems occur – as they always do – the construction manager is the project’s first responder, ready to make the changes required to move the project past the issue.
In a tiny house, the project manager would represent the client throughout the project, estimate the budgets, set the schedule, retain the craftsman and sub contractors to build the tiny house. Often with a project manager, there is a budget set and a fee for the project management services. Some may refer to this as a cost+ contract or a type of AAIA contractual agreement.
a person or group who builds, especially one who contracts for and supervises the construction or repair of buildings.
They are the professional with often years of training in their craft and related venues. The builder provides a product/building to the consumer with all the associated, known and unknown risks involved, via a written contractual agreement. Our definition of a builder is one the meets the insurance requirements and a sustainable business model.
The insurance premiums impact the costs of a tiny house or any home in direct proportion to gross revenue. The liability package runs 12%, workers comp is 11% of wages paid out, theft insurance and risk insurance. Everything being equal, one could expect to pay 20% to 25% more for a tiny house purchased through the builder than a back yard mechanic and wannabe builder.
But are things really equal? Not really.
The wages are large factor as the lower 4 levels either pay themselves nothing, nada, zippo or often pay themselves a low wage. We recently saw a wannabe say his labor rate is $12 per hour as he links it to liable wage, whereas a reputable builder will often be paying more…. a lot more.
In public policy, a living wage is the minimum income necessary for a worker to meet their needs that are considered to be basic. This is not necessarily the same as subsistence, which refers to a biological minimum, though the two terms are commonly confused. These needs include shelter (housing) and other incidentals such as clothing and nutrition. And yet it is not the wage of someone that has a skill set of tools or knowledge to build a tiny house.
For instance on the average a livable wage;
In California a livable wage is $12.34 for a person of one and for a person with a child it is $25.27. For a construction trades person the average wage is $23.55
In Minnesota a livable wage is $ 9.69 for a person of one and for a person with a child it is $20.64. For a construction trades person the average wage is $23.80
In New york a livable wage is $12.75 for a person of one and for a person with a child it is $24.69. For a construction trades person the average wage is $23.99
In South Carolina a livable wage is $ 8.72 for a person of one and for a person with a child it is $16.98. For a construction trades person the average wage is $15.48
California may be upwards of $40 to $50 an hour, in the Midwest $25 to $40 an hour for craftsman plus labor burden. This labor burden number is often 50% to 150% higher than the gross hourly wage. As costs are often used as the basis for pricing services or products, this is why it is so critical to obtain an in-depth understanding of the true cost of an employee.
The builder also tries to price with a net profit of 2% to 5%, this profit is often what the builder uses as seed money for developing new products and expansion.
You will notice net is highlighted and underlined. It is not the gross profit as gross profit has all the cost associated with the project and running the business.
We have seen companies fail mostly for not understanding the costs of labor burden as well as not understanding what their overhead really entails.
“In business, overhead or overhead expense refers to an ongoing expense of operating a business; it is also known as an “operating expense”. Examples include rent, gas, electricity, and labor burden. The term overhead is usually used when grouping expenses that are necessary to the continued functioning of the business but cannot be immediately associated with the products or services being offered (i.e., do not directly generate profits). Closely related accounting concepts are fixed costs and variable costs as well as indirect costs and direct costs.
Overhead expenses are all costs on the income statement except for direct labor, direct materials, and direct expenses. Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.”
A reader commented recently; “Seems some companies are out to get rich off a concept that is based on a way of living with minimum (even minimum money). “
This reader is obviously making a comparison that a purist = DIY = a builder. They are also missing the fact that a livable wage in New York is 46% higher than South Carolina. We are getting used to getting “slammed” by others about our pricing structure or taking advantage of others. Seems it is one of the road hazards we have encountered from time to time along this road less frequently traveled. Our opinion remains the same, we provide a quality built tiny house fairly priced.
There are associated risks at each level for buying from the purist through the builder levels and most of the risks involve consumer being at risk. And this is by far the biggest difference in the levels, as the builder takes on the majority of risks to protect and provide a product promised to the consumer, while the lower levels often is a trade-off for savings vs. risk.
And within all of these communities, you will find subcultures and sub-communities….and each with their own set of values and rules that are acceptable to them.
JoAnn, a friend of mine, made this comment,
“Last night I caught the movie about the founding of FB and thought how many different sets of rules there are. One of the benefits of a small community was that you knew what the rules are/were. Those who went to a much larger community and the various schools all had many sets of rules. No big revelation, but something that I’d not thought of so much previously. Multiply that times worldwide communities and it might be overwhelming if we were given that all at one time”
Given that, in the tiny house movement, there are many smaller communities and all feel that their rules should be the ones used as the “model” of the movement.
But in truth, it seems unfair to compare a purist against a backyard mechanic or a wannabe builder against a builder. The tiny house movement is about people downsizing and desiring to be more conscious of their lifestyle and expenses. There are many roads to achieve their goals and some would rather buy a turnkey unit rather and use their time for other things rather try to build one. And some take great pride in knowing they did it themselves, by their self, and they should be proud of their accomplishment.
A typical tiny house, if there is such a thing, is about 120 sqft and Tumbleweed Homes website notes that the typical material costs would be around 20K. Some take great pride in material costs being 5-10k or less. And they should feel proud for accomplishing this feat as it is not an easy task and involves a lot of time to find those “deals.”
The purist per square foot cost could start at $40 per square foot while the builder turnkey price would range from $205 to $ 485 per square foot for a turnkey tiny house. Using Tumbleweeds figures this could range from $47 to $166 per square foot for material alone.
RVs can start at $100 per square foot and I have seen custom ones (Spacecraft RV) top out at over $478 per square foot. We built a custom RV that came in around $500 per square foot as it had a lot of backup systems and stainless steel water tanks meant to take the RV off the grid for extended periods of time.
Tiny Houses turnkey built by a manufacturer can start at $200 per square foot and run up to $500 per square foot.
Larger custom built turnkey fish houses seem to range from $209 to $350 per square foot.
The chart below consists of numbers for different scenarios for tiny houses and RV’s. The 1st 3 are examples of DIY material only and should give those something to think on for a tiny house material costs. Minimotives and Tiny r(E)volution numbers are spot on as they kept accurate records and do not contain labor. The numbers should provide you a basis to benchmark what material costs are possible.
All the numbers are based on websites published information and unknown specifications. Do your research diligently folks.
Special thanks to Macy Miller from Minimotives and Drew Odom from Tiny r(E)volution for the DIY number examples
We can live as the early humans did or we can live in a quality built turnkey tiny house. The choice is yours and yours alone. What’s your choice?
If you desire more information on purchasing a tiny house that is priced fairly and by YOUR specifications, please drop Jim an email at firstname.lastname@example.org