A business mentor of mine reached out with an interesting question.
How would I think about selling a lot of little homes?
Tiny homes are my favorite. In 2015, V and I house-sat a mansion in New Jersey for a few months. The lifestyle isn’t ideal for me. Taking care of the place was a part-time job in it’s self. It would be interesting to see market data on the overall housing market in America. Are more people going with smaller homes these days?
Don’t have time to read this whole article? My overall response is to either sell via existing platforms (eBay or Wayfair) or craft a content story that tells the story of successful entrepreneurs who use the homes to build complexes that are cash flow positive.
Market Research
250,000+ people ‘like’ the tiny homes blog facebook page. It’s a click-bait page for driving traffic to their website. The website is monetized by AdSense revenue. What does that mean?
Monetizing with AdSense revenue means that the owners of the page and website are probably getting paid on a CPM basis. That means they make a few dollars/cents per 1,000 visitors (or people who click to the page).
Why is this a signal?
If there was a better opportunity to get affiliate income from home sales, the site would probably be monetizing from CPA offers or affiliate commissions from sales. If a home sold for $30,000 and they get 6% of that, they would probably pull the advertising and push direct home sales.
This may be a signal that people are interested in the concept of small homes, but aren’t making the decision to purchase them.
Average monthly search traffic in google is healthy:
Again, this is a signal of interest rather than purchasing decision making…
I notice that the competition is high on google. That means that advertisers are paying to get their products listed on this page. Below you can see jet.com, and wayfair.com are all paying for that position.
Wayfair is a BIG drop-shipping company. If they are paying to be here, they are probably seeing returns from the activity (assuming that their AdSense girl knows what she is doing).
This is a good sign, but when we click the ads, we are taken to pages which sell sheds, not homes. That is a signal that small homes aren’t being sold there. This signals to me that pre-built homes aren’t being purchased on the internet.
Competition – The Small House Market
You can buy pre-built homes on eBay for about $32k.
Clayton Homes sells pre-manufactured homes. Warren Buffet’s BKSH owns Clayton Homes. I remember from reading Mr. Buffett’s letter to shareholders that he is happy with the performance of that specific investment, even during the 2008 housing market downturn. They sell homes ranging from $20-300k per unit.
This company has an OK user experience in the way they provide prices for their Yurts. It would be good to do develop a tool like this on smallhomeshawaii.com.
Target Markets/Selling Strategies
I think there are two strategies to approach the problem.
Selling to entrepreneurs or consumers.
Selling via Existing Platforms
eBay and CraigsList already have the traffic. eBay has customer protection which might support initial sales. Selling via eBay has a very low cost (time and money) to get started. All you need to do is post the listing.
Wayfair is a dropshipping company. If they agreed to list the homes, they manage the whole sales process. As the supplier, you receive money and descriptions for where to send the homes. It may be interesting to connect with them and see if they would be interested in adding the homes to their listing. The benefit of using them is that there would be no website development or brand building expenses.
Content Marketing to Inspire Entrepreneurs
The challenge with housing is that choosing to live in a little home is not a quick consumer purchase. It is a lifestyle decision. The tiny homes model needs to come with individual narratives to individual consumers. Therefore, there needs to be a system to inspire others to build communities with the homes. For that, an entrepreneur would be helpful.
I see the entrepreneur as the girl who wants to buy between 5 and 100 units per order. Their goal would be to buy land, place the homes, hire out the property management and see a long-term income from rents. Ideally, they would have no day-to-day involvement in the business after it was set up.
To inspire these people, there needs to be a story of how it would all work.
Here’s a rough plan on how to tell that story:
Step 1 – Tell the Story with a Daily Content Blog
Partner with a self-starting entrepreneur. Let’s call her Sally. Sally’s mission will be to develop a housing complex using the small homes.
Sally will be committed to:
- Creating daily content (video log would be ideal) during the building of the complex and posting it to smallhomeshawaii.com
- Publicly record the income and expenses of the project. Publish a monthly income/expense report
Ideally, at the end of this process, Sally will be able to say, “I built an asset which pays me $5,000 a month without day to day involvement. Best of all, I used Hawaii Small Homes so I was able to get the asset up and running in a few months.”
This will be a self-fulfilling marketing endeavor. Income reports get lots of traffic and drive lots of sales.
Step 2 – Offer a Discount to Those that Contribute to the Web Marketing
The next person who wants to become a developer with the small homes will have the opportunity to do the same. Offer them a discount on the homes if they commit to publishing the story of their success to smallhomeshawaii.com.
As the volume of success stories grow, the website will grow exponentially as a place to sell the houses directly to anyone interested in the buildings.
Also, create a viral video like this one or this one to tell the story of their success.
Interesting Articles Regarding the Small Homes Market
A group in Austin, TX is building tiny homes for the homeless. In San Francisco they are working on building tiny homes for the homeless too.
Short-term rentals are already being done by a small team in the North East called GetAway.
My friend David Vu is doing well with his vacation rental arbitrage business.