CASE STUDY RESEARCH PAPER- REPORT ( 48 Hours - A+ Score Required)
jhayes
1.CONE-Presentation.pptTiny House on Wheels vs a Traditional Home
Lorelay Mendoza
Environmental Engineer
Class Id: 55
The Situation
SDSU environmental engineering graduate looking for a place to live.
Ideally, she is looking to move in Santa Cruz County
Homes are expensive, and being a millennial, she has spent a lot of money on avocado toast throughout her education, leaving her with perhaps less money to purchase a home
She is exploring an alternative living situation and assessing the costs associated with it.
Cost of buying a traditional home
- $ 625,000 home
- Down payment: 625,000 * 20% = $ 125,000
- Home inspection: $500
- Mortgage assumptions:
- 30-year fixed
- interest rate is 3.833 % APR
- Property taxes are 1.1% per year
- Home insurance: $800 per year
- Monthly payment: $2,979
6025 Highway 9, Felton, CA 95018
2 beds 2 baths 1,316 sqft
$625,000
Other Costs for Traditional Home
Furnishing a home:
Estimates
$3,000 first bedroom
$2,000 second bedroom
$1,000 per bathroom x 2 = $2,000
$5,000 living room x 1 = $5,000
$2,000 kitchen x 1 = $2,000
House listing claimed refrigerator and laundry appliances are included
Total cost of furnishing a home: $ 14, 000
* Note: online forums suggest furnishing costs should be 25% of home’s value or about $10,000 per room. No.
Utilities: Estimate $200 per month for a young couple
Cost of a Tiny House on Wheels
- Assumptions:
- $40,000 RV loan
- 10-year fixed
- 5% APR
- = 120 monthly payments of $425
- Tiny House dwellers have reported off-grid utility bills to be as low at $15 per month. We will estimate a generous $200
- Find Craigslist ad for backyard rent to park your Tiny House. Estimate $500 monthly
- Estimate a generous $10,000 in furnishing costs
A Tiny House on wheels can be built or bought for about $32,000 for which one can take out an RV loan
Considerations of Tiny House
$40,000 is reasonable if built oneself.
Suppose one spends 6 months of full time building.
Opportunity cost of building house instead of working at an engineer’s pay of $34 an hour
($34/hour)*(40 hours/week)*(4 weeks/month)*(6 months) = $ 32, 640
Suppose SDSU alum has a partner who is also an engineer and also spends 6 months building.
$ 32, 640 * 1.2 = $ 39,168 Please note gender gap in pay.
Total opportunity cost of building Tiny House = $32,640 + $39,168 = $71, 808
Comparison
| Alternatives | Fixed Cost | Monthly Operating Costs | Useful life (of loan) |
| Traditional Home | $139, 500 | $3179 | 30 |
| Tiny House | $10,000 + $71,808 opportunity =$81,808 | $1,125 | 10 |
EUAC
Traditional House
- EUAC = $139,500(A/P,7%,30) + ( 12* $ 3,179)
- EUAC= $139,500(.0578) + ($38,148)
- EUAC= $ 46, 211.1
Tiny House
- EUAC= $81,808(A/P,7%,10) + (12* $1,125)
- EUAC= $81,808(.1233)+(13,500)
- EUAC= $23,586.9
Assuming 7% interest rate as book often does
Final Considerations and Recommendation
- Assumption that Tiny House welling couple has vehicle powerful enough to tow Tiny House
- Off-grid living is more more demanding in terms of mindfulness (composting toilet, water usage, electricity etc.)
- Larger house means more cleaning as well
- From the perspective of an environmental engineer and a young adult who wants independence without a crippling amount of debt, my recommendation is to live in the Tiny House.
