My 83-year old mom bought a building like that and paid my son to remodel it for her. Not to live in, mind you. She makes quilts there. Goes in the real house to potty and shower and stuff. My son did put both heat and A/C in for her but I’m pretty sure she has no plans to live in there. Then again, she’s about as Conservative as you can get and laughs at eco-nuts.
I could live in a small house as long as I have a decent kitchen and bathroom. I will need a large detached garage(minimum 3 bay) and an unfinished basement under the house...maybe one under the garage too. And a good sized patio with a storage shed. Maybe two storage sheds. The patio should have a built in gas grill and bar and the yard should be very large(minimum one acre) and fenced in. Plenty of sidewalk and driveway.
With those things I could get buy with a 500 ft^2 house and not even feel like I’m sacrificing.