Saturday, August 07, 2010

Trailer Trash

We're seriously considering buying a mobile home. It sounds like a joke, but it makes tremendous economic sense.

It's $85k. We'd offer $80 with 30% down ($24k), for a total mortgage of $56k. It's in a co-op, which means no space rent, but which also means the interest rate on the mortgage would be ridiculous (as much as 12%) and the loan terms quite short (10 years or less), BUT that interest is tax-deductible. If we had a 10-year mortgage at 12%, our monthly payments would be $803. If we got the more common 7-year mortgage, our payments would be $988. The HOA dues are $270 a month. Property tax is around $100 a year. So worst case, our monthly costs just to have a roof over our heads would be $1266 a month, with an annual interest deduction of about $6500. Compare that to our current rent of $2k per month, with no tax benefits at all. In seven years it will be paid off and our monthly costs will only be the HOA dues. The co-op expires in 2025, after which it's anybody's guess what will happen to the park, but by 2025 I hope I don't care.

There isn't much dirt for vegetables, but I could have an herb garden. An elderly lady in my ward has offered her backyard for vegetable gardening, which would also get her free veggies. I might be able to find somebody to host a chicken flock if we split the cost of feed with them. There are lots of solutions.

There are drawbacks as well. No garage. No real yard. My own prejudices about what kind of people live in mobile home parks. We stopped one couple walking through the park and asked them how they liked living there, and they couldn't say enough good about it. Renting out your unit is not permitted by the HOA, although the realtor admitted that there are probably a few rule-breakers in the park.

Decisions, decisions.

7 comments:

Stephanie said...

Just know that your trailer will never appreciate - they are more like cars that get a tax break than a house. It would still definitely be a home, though.

Financially, it sounds like it makes sense and I'm sure you can make any space beautiful and functional. I still don't see you happy in a place with no yard, though, but it sounds like you've thought of it and are weighing your options. How much do your boys use the yard? That needs to be taken into consideration, too!

Good luck!

thefoxkids said...

my smart sister was thinking the same way I was.. it won't appreciate rather DEPRECIATE... i'm actually suprised it's going for 85K, is that comparable to others in the same coop?? BUT being devils advocate, there aren't many REAL/stick built homes that havn't tanked in this economy and you have to live somewhere... as long as you go into it with your eyes open, go for it!!! makes VERY good economical since to me!!!

colleeeen said...

We have to leave our current rental - we can't go on renting from a landlord this flaky. We found another in the neighborhood for $1900 a month, but it's a 1-year lease. Which, if we needed to leave, we could break and just say goodbye to the deposit, but I don't really want to do that.

A 40-year old, 1200 SF detached fixer-upper is still $350k around here. That would drain our savings and put us into a 30-year mortgage on a house that has no guarantee of appreciating in the next 5 years and could have all kinds of scary problems lurking in the walls and foundation, plus $3500 a year in property taxes.

We're not planning on taking all of that leftover $ to party - right now we are funneling as much money as we can into Dan's retirement accounts and the kids' college accounts. Dan would like to be able to take unpaid vacation time off of work. He'd also like to earn his master's degree. We'd like to purchase a retirement property. We're not banking on selling the house to fund our retirement - we're viewing the house strictly as a place to live in, NOT as an investment. Renting gets us nowhere (except that it's cheaper than owning right now), so buying this would be less of a waste, with less money out of our pocket every month and some tax benefit.

They're asking $85k because this is south orange county and the median home price here is $476k, even after the real estate collapse. There is another one for sale for $55k, but it's smaller and does NOT include a share in the park, so the space rent would be $915 a month, on top of the mortgage.

colleeeen said...

Examples of houses with comparable square footage to the mobile:

http://www.zillow.com/homedetails/23952-Swan-Dr-Lake-Forest-CA-92630/25537711_zpid/

$390k. Backs up to the freeway. Postage stamp sized yard.

http://www.zillow.com/homedetails/21066-Champlain-Lake-Forest-CA-92630/25526916_zpid/

$400k. Even smaller yard.

There are dozens more like this. We could go on waiting and bank on interest rates shooting up, which would drive house prices down disastrously but would almost certainly trigger another recession. Another recession could mean Dan losing his job. Predicting the future is maddening and I am already so frustrated with the endless uncertainty I have been living in for the last 11 months that... well, I pretty much want to cry. But crying gets nothing done and so I'm trying to figure out a solution to choosing to be a single-income family in a dual-income world.

Kathryn said...

Since it seems as if you are serious about this here is our advice....besides the types of pipes used in plumbing I already told you about.

1) Do your research....don't take the first one that you see. Look at others and in various parks and compare. Just because a price is cheaper doesn't mean it's the best deal.

2) Once you narrow it down for the ones you like, total all the costs: mortgage, space rent, any hoa's, property taxes (and chances are you won't get tax credits for it since you won't officially own the land it's on), etc to see if it's really worth it for you cost wise.

3) Really pay attention to the flooring. Somehow during our walk through and inspection, we all missed a huge hole in the floor in one spot. Then it was too late and we couldn't get into worked into the deal for. We had to pay for that. Then even if you have good floors....always pay attention. If you notice a weak spot, get it checked on asap. Chances are it's related to a plumbing problem.

4) There are some lots out there with yards you can garden in. Yes the lots are smaller but if it's the right size you could easily put in a few raised garden plots. Ours had space for 3 and Katelyn still could have played out back. But we decided due to all the problems to sell instead.

5) Clark says keep in mind that for any repairs to think of it as a car. With a house if you want to fix it up you can take out a small loan. But with a mobile/manufactured home there aren't any out there (unless it's changed but as of 4 years ago we couldn't find any home improvement loans for them.

These are just a few things we wish we had known. And if you ever go househunting on a Saturday, call and let us know, we'll gladly come along on a trailer trash hunt. We can tell you if a place is a good one to make an offer on. Believe me, after our experience we are more than willing to make sure friends don't end up with a lemon like we did.

Kimba said...

Ultimately it is about what you are comfortable with.

If you're fine without a garage, without owning land, without the freedom to decide how you'd like things to look on the outside, or being able to decide to rent it out if you leave rather than sell it, do it if it gives you peace of mind.

If you'd rather find a place with land, a garage, more privacy/autonomy, then perhaps consider expanding to a different area.

It is all about what you want and need vs. what you're willing to do without.

I'd not do a trailer unless I owned the land outright. Even being able to write the interest off in taxes doesn't guarantee it'll put you in a better tax bracket. You'd have to look at how it'd affect that to see if it does you any favors on the bottom line.

I've always hated the idea of paying rent because it lines somebody elses equity pocket instead of my own.

If you're entirely loyal to your location, I understand, but if you're even a little bit open to expanding- you might want to consider parts of Corona, Norco, S.B. county (Chino anyone... haha), Ontario, North of Norco (I forget the new name for the place in between Norco and Ontario- pretty newish place)... or N. or Central Orange like La Habra, Fullerton, Anaheim, some of those houses are a really good deal right now. Lots of those Riverside/SB county houses have tons of land. The exchange of course is traffic and longer commute, different schools, different ward... but well, it is all about what you prioritize as more important.

Good luck with your decision.

Kimba said...

BTW so sorry for the repeat posts! I ran into some weird stuff while trying to comment... Ugh bloggosphere!