These Enchanting Fairytale Cottages Were Around Before Tiny Houses Were a Thing (2024)

Dan Pauly loves watching people discover his tiny, fairytale cottages for the very first time. "It doesn't matter if it's a little kid or an 80-year-old guy," the Elk River, Minnesota-based craftsman tells CountryLiving.com. "They'll come completely across that street as soon as their eye touches that building ... it makes them smile and it brings them back to their childhood—like their dreams have come true."

That's the magic of The Rustic Way. When Pauly began building compact cottages 25 years ago, the tiny house movement wasn't even a thing yet. "I was just having fun," he says. "I thought I was going to go break a bunch of rules in the backyard."

The fourth generation woodworker had left his job building high-end houses and wanted to build himself a sauna. But not just any sauna. "Next thing I got this curved roof on there, then the chimney came, and I was like, 'That's cool.'"

So cool, that people started knocking on Pauly's door asking about them and snapping pictures. He hid it away until he could perfect it and gather the appropriate copyrights, and shortly after, his business, or as he calls it, his destiny, was born.

Now, with the help of his wife, who landscapes and handles the books, Pauly produces the prettiest little structures, including saunas, guest cottages, garden sheds, play houses, and outhouses—all so charming, they look like they were plucked from the pages of a storybook (or maybe even Carmel-by-the-Sea, California). And they each come with a charming history as well: Pauly learned the art of woodworking from his father, who learned from his father, who learned from his father, Pauly's great-grandfather, who immigrated from Switzerland in the late 1800s and built barns for Minnesota farmers. Today, Pauly sources and reclaims wood from old structures across the Midwest, including barns.

"As I uncover an old barn or shed, I realize that it could be the same lumber that my great-grandfather used more than 100 years ago," Pauly said in a post on his website. "I think that respect for the craftsmen and craftswomen of the past, and for the wood they used, make a difference in each new piece I create. Until you have dismantled an old barn, you can't imagine the painstaking effort it took from Old-World craftsmen to erect it. They were each a work of art."

Priced from $12,000 to $28,000, Pauly's 13-foot-tall, 380-cubic-feet tiny homes attract all kinds of buyers, from all over the world. Unfortunately for those overseas, he can only ship within the United States and Canada.

Pauly's favorites are the guest cottages—he loves seeing buyers put their own personal spin on the interiors when he's done constructing. He says he has a buyer in California who ordered several for a miniature village and another up in St. Paul whose children spend entire winters inside theirs—the bunkbeds and built-in heaters allow for it.

"It's somebody's dream, and they fall in love with it, and you help them make their dreams come true," Pauly explains. "That's the fun part of it is to be able to watch somebody light up and truly change their life. Because for the rest of their life they're going to look out their window and do what I do at my house, which is smile. It just makes you happy."

Each year, he brings his buildings to the Minnesota State Fair, where they captivate new clients who who might spend years saving up before they commission their own, plus another year waiting for Pauly to build it.

One such client was none other than Nashville Songwriters Foundation Hall of Famer and Minnesota native Dennis Morgan, who has written melodies for Aretha Franklin, Eric Clapton, Barbara Mandrell, and Faith Hill, and published songs for Garth Brooks, All-4-One, Feargal Sharkey, and Trisha Yearwood. He stopped by Pauly's booth to buy one in 2015.

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"In order to spark his creative writing for music, that's what he wanted to use," Pauly says. "He wanted to sit in it and start writing music. He's written 50 songs since he got that building."

Pauly has visions for even more uses for the structures: a small tasting room at a vineyard, a tack room at a horse ranch where riders could grab their saddles. But he's thinking a lot these days about the future of The Rustic Way. "I created this thing, I think the world deserves it, and how to accomplish it, I'm hoping somehow that can be achieved. It's the end game. Not that I'm ready to give up, but you have to think forward far enough for it to be reality. [Rustic Way] needs some company or somebody to buy into it … "I've got to find the right people who want to take this to a whole different place."