This tiny toy boat is very well made. It even has little oars! Aside from being a bit of an art piece, though, it seems mundane. Save for the fact that it starts glowing when Detect Magic is cast.
If the players happen to get the little boat wet, it will rapidly expand into a full-sized rowboat, which can easily carry four people in full adventuring gear. Once dry, it returns to its original, non-encumbering size. Of course, things don’t become dry as soon as they are removed from water. It might take a few hours on a hot summer day, or even several days if the weather is less favorable. The party may be forced to leave it behind and retrieve it later.
If the characters do bring this with them, be sure to note who is carrying it, and take appropriate action if they, say, walk beneath a waterfall, or get hit by a blast of water while fighting an elemental. The suddenly expanding boat may destroy any fragile equipment stored in the same container as it.
I love the downside to this.
I’ve been working on making more magic items with downsides. I’ve been aiming for “Using it requires you to decide whether the benefit is worth the downside every time, but the downside is never so bad that you’re WORRIED about using it.”