Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Three years ago, Christoph Kesting built a tiny home for himself in Guelph, Ont., using a standard shipping container as the base. Then, after selling it – the buyer ended up moving it across the province to Peterborough – Mr. Kesting wrote a book about his experience.
Now he has taken his talents to market.
For $40,000, customers can order their own kit for a shipping-container home from Mr. Kesting’s company, called How to Build a Container House. It arrives with everything you need and a copy of his book to boot. The entrepreneur, who lives in Vancouver, will also pay for the first 200 kilometres of shipping of the two-tonne steel home, which he calls the Foxden.
“It’s a do-it-yourself container home,” the 35-year-old Toronto native says. “It comes with all the materials, even the solar panel if you want the off-grid version.”
Mr. Kesting estimates that it will take the buyer and a couple of friends two weeks to cut the holes for doors and windows, cover the outside with the precut wood and add the second storey, which comprises the bedroom and rooftop balcony.
The homes can be on or off the grid, with a composting toilet and solar panels available for those who don’t want to pay water and hydro bills.
Though he doesn’t yet have any employees, Mr. Kesting has partners, such as designers, who have helped map out how the homes work, particularly the option to add second or third shipping containers to create larger homes with two and three bedrooms.
Mr. Kesting travelled to Toronto last month to pitch his idea on the CBC show Dragons’ Den in the hopes of securing $150,000 to help launch his business. He expects to sell two or three Foxdens in the next year, and seven to 10 in Year 2, bringing in $1-million in total after three years of operation.
In addition to a cash investment from Dragons’ Den, he also hopes to qualify for sustainable-technology grants from the government. He says the Foxden runs a carbon deficit because of its solar panel.
Perhaps Mr. Kesting’s biggest challenge, however, is helping customers buy his product in the first place. The price point is a little too low for them to qualify for a conventional bank mortgage and a little too high for an unsecured line of credit.
Though he says that banks love to lend money for mortgages, they are usually secured by “large pieces of land and large homes in particular,” Mr. Kesting says, and his shipping container homes are neither.
The Challenge: How can Mr. Kesting help customers buy his tiny homes if banks won’t lend them money?
THE EXPERTS WEIGH IN
Sunil Mistry, partner, KPMG Enterprise, Toronto
You can’t really own one of these homes without land, so maybe if the bank won’t give you a conventional mortgage, they would allow you to secure the loan against the land.
It’s almost incumbent on Christoph to go to banks. Maybe it’s not the traditional banks, maybe it’s some of these credit unions that may be willing to assist. So then on his website he could say, “I’ve got a partnership with these two or three types of institutions who would lend to you.”
Christopher Molder, principal broker, Axess Mortgage, Toronto
I spoke with mortgage insurer Canada Mortgage and Housing Corporation (CMHC) on the topic, and it said that in order for a home to be insurable, it needs to be fixed to a foundation, which these shipping containers are, and it must conform to the housing standards of the jurisdiction where it’s built. If it meets those standards nationally, then arguably, although it’s not proven yet, these homes should be insurable by CMHC, which in turn would mean that some lender should be willing to lend on it.
In my professional opinion, these homes will not be financed by any conventional lender. The only solution I see is if Christoph were to find a venture capitalist of sorts who would be willing to provide the mortgage financing, and there’s no reason why that can’t be a lucrative business.
Probably the best candidates for these types of properties are people who live in the city, who own homes, who want to have a cottage property or country property. They’ve got equity and they can take out private financing or a line of credit.
Shannon Persse, director and owner, Tiny Living Ltd., a builder of custom micro-homes on wheels, Delta, B.C.
We got in touch with a few mortgage broker-type people who can find financing for clients. They’re not a bad option because they’re willing to do the legwork and find the lenders and they have the contacts. A lot of tiny-house companies in the U.S. are doing that, they’re finding lenders for clients.
THREE THINGS THE COMPANY COULD DO RIGHT NOW
Go the non-traditional route
Strike up partnerships with non-traditional lenders, such as credit unions.
Talk to venture capitalists
Consider forming a partnership for providing loans, which could be a lucrative business.
Work with mortgage brokers
They have the contacts to help your customers find loans.
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Interviews have been edited and condensed.