| Does the myth that mobile homes depreciate in | | | | A mobile home on land might appreciate more |
| value keep you from investing in them? Well, they | | | | slowly than the "regular" house, but faster loan |
| do lose value in a park, on a rented lot. Mobile | | | | pay-down covers this factor. Pay less per month |
| homes with real estate, however, are an entirely | | | | and build more equity! Don't expect your real |
| different investment. | | | | estate agent to tell you this. Don't expect him to |
| My mobile home doubled in value in the twelve | | | | even agree with me after you explain it. I sold |
| years I lived in it. The home deteriorated a little | | | | real estate years ago, and math skills were not |
| (don't all houses?), but the value of the land | | | | part of the licensing requirements. |
| continued to rise. Also, by renting rooms, I took in | | | | Cash Flow With Mobile Homes |
| far more money from my home than it originally | | | | In the example given, you'd initially lose about |
| cost, and I was living in it! | | | | $150/month on the house, after your payment, |
| Forget your prejudices and look at the numbers. | | | | taxes, insurance repairs and other expenses. |
| In this town, for example, a two bedroom house | | | | You'd break even or better with the mobile |
| rents for $800/month, and costs about $120,000. | | | | home, and after the loan is paid (ten years), you'd |
| A mobile home gets $500/month, but you can | | | | have a lot of cash flow, of course. |
| buy one on real estate for $50,000 or less. The | | | | Mobile homes are cheap to maintain. The furnace |
| cash-on-cash return on investment is obviously | | | | died in rental I owned, the most expensive repair |
| higher with mobile homes. | | | | you'll have in a mobile. I replaced it for $1,200, |
| What about the long term return from | | | | much less than a furnace for a larger home. For |
| appreciation? House rentals here typically have | | | | $200 you can have a mobile home roof tarred, |
| negative cash flow, while mobile home rentals at | | | | instead of $5,000 to re-shingle a traditional roof. |
| least break even. Investors prefer houses | | | | Windows, plumbing, doors - they're all cheaper. |
| anyhow, believing they'll build equity faster, but is | | | | Property taxes cost less, because they're based |
| that true? | | | | on value, and mobile homes have a lower value |
| Faster Equity With Mobile Homes | | | | than stick-built houses. Insurance will cost less too, |
| Buy a house for $120,00. Put $20,000 down, and | | | | because you are insuring less value. The only |
| you'll have a $100,000 mortgage loan. Amortised | | | | precaution to remember here is to be sure you |
| over 30 years at 6% interest, you'll have a | | | | can get insurance. Very old mobiles may be |
| payment of $599.60. Of the first payment, $500 | | | | uninsurable in some areas. |
| will go towards interest, $99.60 towards principal. | | | | The Bottom Line |
| In other words, you only built equity of $99.60. | | | | Mobiles have their own problems. Renters who |
| I'm ignoring appreciation, but only for the moment. | | | | have to rent for less sometimes pay late, for |
| Second scenario: Find a nice mobile home for sale, | | | | example. These issues are minor compared to |
| and borrow only $30,000, at 8% interest, | | | | the advantages. Your twenty thousand could buy |
| amortised over 10 years. Note the higher interest | | | | you two mobile home rentals, with ten thousand |
| - this is always the case with "factory built home | | | | down on each, instead of one negative-cash-flow |
| mortgages." The shorter term is normal too, so | | | | house, for example. |
| you'll be done with payments in 10 years instead | | | | Take an honest look at the numbers. The two |
| of 30. | | | | investors in my town that own most of the |
| Now, despite higher interest and a shorter term, | | | | mobile home rentals always have cash flow, and |
| the payment will be only $363.99. The first | | | | have millions in equity now. Other investors, |
| month, $200 will go towards interest. That means | | | | following their prejudices, struggle to make money |
| the other $163.99 goes towards principal. You | | | | with their "nice" rental homes. So don't |
| bought more house (built more equity) in this | | | | automatically pass on those mobile homes for sale |
| scenario. | | | | when you're looking for a good investment. |