Towards a better tinyhouse

Inventing to freedom?

Chattel vs. Real Estate

leave a comment »

You may have come across a “pros and cons” regarding tinyhouses at one point or another.

For a tinyhouse on wheels, one of the pros usually listed is that there is no property tax.

A con is that they depreciate more rapidly than a regular house, another listed is the loan terms are worse. (I have previously pointed out that assuming the structure of any house will go *up* in value is silly.)

My understanding, from what I have read, is that these 2 stem from the same root. That a tinyhouse on wheels is chattel, not real estate

This document has a section that explains the situation well. Search it for “chattel” and you’ll find it, though the whole doc is an interesting read.

The personal property wikipedia article is also a good starting point to read about the distinction.

Anyway, tinyhouses are built to last as long as real estate, and apparently mobile homes can be financed as such, so maybe it would be a good idea to do this with tinyhouses, too. That could reduce the total cost of ownership even further.

Another interesting thing is how something like a tinyhouse can, from a tax standpoint, I think, morph between chattel and real estate under the tax system. Add wheels, chattel. Take wheels (or trailer chassis) off, real estate. I don’t think there is any need for a foundation to be installed for it to be considered real estate.

So here we have a situation in which you could hypothetically live in it tax-free, then when it comes time to sell it, take off the wheels and it is like a regular building with regards to the assessed value.

The only problem is that zoning and maybe building codes or something might prevent you from doing that in a practical way, since the trailer wouldn’t be allowed in the first place, and it might be considered prefab so the government would refuse to give you a permit to put it on your land anyway sans wheels, when it was time to sell.

Advertisements

Written by gregor

November 13, 2010 at 22:42

Posted in Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: