Is the “bigger is better” mentality fading in terms of real estate? Are the days of McMansions coming to an end? Well, it seems for some homeowners it is. There’s a new movement out there that’s creating quite a buzz among environmentalist and folks seeking a simpler life. It’s called the Small House Movement and it might just be the next small thing.

These homes bring a whole new meaning to up close and personal since most are less than 1000 square feet, some are even less than 100 square feet.

Gregory Paul Johnson, who is a founder of the Small House Society in Iowa City, says there are many reasons people are choosing to drastically downsize. Among the most practical motives are rising energy costs and the mortgage crisis. Basically, people want small homes because they cost less to purchase, maintain, and heat and cool.

And for those reasons, builders who specialize in these types of construction have seen an increase in their business this year. Brad Kittel, owner of Tiny Texas Houses in Luling, Texas, says he’s built 10 homes this year up from just four in 2007.

Jay Shafer of the Tumbleweed Tiny House Company based in California, says he’s sold five houses and 50 sets of plans, up from a yearly average of just one house. Although the growth appears modest at best, it still shows a growing demand for houses that minimize one’s footprint, both carbon and structural.

The Tumbleweed Tiny House Company creates homes ranging in size from about 70 to just over 800 square feet and cost anywhere from $20,000 to $90,000 to build. Even the owner Mr. Shafer has lived in a tiny house himself for over ten years. At 100 square feet, his house is smaller than many people’s closets. When asked about the appeal of the homes he said, “The small space is a symbol of something else. I think it’s a symbol of a desire for a more simple life.”

Even if you’re craving a simpler life yourself, don’t think you’ve got to sacrifice on style. The homes resemble cabins or birdhouses even with their wooden exterior and high pitched roofs. Sustainable materials and reclaimed lumber are incorporated into all the homes and The Tumbleweed Tiny House Company pride themselves on not using first life materials.

These homes are built on wheels, not a foundation like most new construction and because they are so tiny, they’re considered travel trailers and do not require a building permit. You can pretty much put one anywhere you can park an RV. They also come pre-wired for electricity, either an AC plug-in or a solar electric system, and they’re pre-plumbed and ready to be connected to public water and sewer systems.

The interior of the homes are completely finished in pine with stainless steel. The ceilings are vaulted to make it appear roomier and the bathrooms come complete with full shower, toilet and sink. The kitchens include a two-burner stove, an under-counter refrigerator, a bar sink, an instant hot water heater, and a propane boat heater. Storage is also an extremely important asset, as you can imagine. By utilizing overhead space and making otherwise unusable spaces functional, Mr. Shafer promises ample space for a simple lifestyle.

And of course these homes are very energy efficient; they are well insulated and super easy to heat and cool. In fact one small house owner in Olympia, Washington, boasts that even with rising energy costs, her worst monthly energy bill is about $8.00. That seems almost too good to be true, but Mr. Shafer attributes that to the careful attention that has been given to the light, warmth, energy efficiency and proportion of each and every home he builds.

As you can see, these itty-bitty residences have all the modern conveniences of larger homes, just built to a smaller scale. They’re something to consider if you’re looking for a change, literally a change of venue or you’d just like to see more of it in your pocket.

Kenneth R. Harney

The biggest financial fear about so-called “1031 TIC” real estate investment deals appears to be turning into reality: One of the largest “tenants in common” or “TIC” firms — with 8,300 individual investors and office and retail properties valued at $2.4 billion — has filed for Chapter 11 bankruptcy protection.

The firm, DBSI of Boise, Idaho, was part of an investment wave that followed a 2002 ruling by the IRS. That ruling said owners of commercial and residential income properties could fulfill the tax-deferral requirements of Section 1031 of the Internal Revenue Code by investing in tenants-in-common ventures.

Under Section 1031, investors who seek to avoid or defer capital gains taxes on their properties can exchange their interests for “like kind” real estate, provided they follow IRS guidelines.

In 2002, the IRS ruled that tenants-in-common arrangements — under which as many as 35 investors own fractional interests in individual properties — can qualify as vehicles for 1031 exchanges. For example, an owner of a small retail shopping strip might exchange into a TIC that owns a much bigger and more valuable downtown office building.

The tenants-in-common owners could thereby avoid immediate taxation of capital gains and end up with bigger and theoretically higher-quality real estate – tax free – in the process.

The TIC structure comes with built-in problems, however. Their fractional interests generally are not liquid investments — it’s tough to sell them if you need to pull out money..

Some critics also say TIC ventures pay too much for their commercial properties, and that investors have been charged excessive fees to participate.

DBSI managed the activities of dozens of office, retail and other commercial properties in 30 states, but says it got caught up in the real estate downturn and credit crunch.

Now its eight thousand-plus individual investors are stuck in illiquid TICs … and waiting to hear what happens to them next.

The DBSI bankruptcy comes on the heels of recent advisories from the Federal Trade Commission and the Treasury Department warning investors about potential dangers in 1031 exchanges.

Bottom line: Section 1031 exchanges — structured and facilitated by independent, qualified intermediaries — can be a great way for small scale and large investors to save on taxes.

TICs may also fit into the equation, but only if investors fully understand all the risks, including, now in the wake of the DBSI implosion, the possibility that their TIC may go belly up, leaving investors waiting in line at the bankruptcy court hoping for pieces of the remains.